Nurses, Advocates Push For Voluntary HMO Arbitration

The first HMO patient to try to hold his HMO accountable under a new California HMO liability law testified today that his HMO had denied him both vital treatment for his degenerative disk disease and access to the courts.

The testimony supported SB 458 (Escutia), which would allow patients like Goold to choose between courts and arbitration in cases involving HMO interference with treatment — lawsuits that fall under California’s HMO liability law (Section 3428 of the Civil Code).

“I now have extensive fusion of the vertebrae and spine resulting in permanent disability, which could have been avoided had I had a prompt response,” stated Warren Goold, the Health Net patient. “I did not realize when I enrolled in my health plan that I had given up my constitutional right to trial in the fine print. I started up with an employer who provided health care and they signed away that right away for me, knowingly or unknowingly. I have been asked to pay extraordinary costs, $11,000, just to file a case in arbitration because of the extreme damage. A person in my situation who collects long term disability from my employer is no position to pay that cost.”

Goold’s is the first known case under the HMO liability law, effective January 1, 2001. He filed his case about one year ago and has still not had a hearing. SB 458 follows the recommendation of the American Arbitration Association, which announced in March it would only administer voluntary health care arbitrations because of ethical concerns about the process.

Consumer advocates and members of the California Nurses Association complained that problems with mandatory arbitration undermined the 2001 law establishing legal accountability of the HMO to the individual and other patients’ rights Governor Davis has touted as the toughest in the nation.

Among the problems with mandatory arbitration are its secrecy, as there is no public record of abuses revealed; the financial incentive arbitrators have to rule for HMOs to receive repeat business; the fact that legal errors by arbitrators cannot be appealed and arbitrators need not follow rules of jurisprudence; and the high cost for consumers compared to the courts.

“California is alone among the 11 states with HMO liability laws in permitted patients to be forced in mandatory arbitration,” said Jamie Court, executive director of the Foundation for Taxpayer and Consumers, which sponsored SB 458. “Californians should not be second class citizens. Patients should not have to give up their seventh amendment right to trial just to receive health coverage. Innocent patients victimized by an HMO should be able to choose the courts.”

Other HMO liability states have seen few lawsuits, but much deterrence to malfeasance. For instance, Texas, which has allowed the right to sue in court since 1997, has had only a dozen lawsuits.

In a new area of law, such as HMO liability, there will be no legal precedent that develops if all cases are heard in arbitration. There will literally be no public case law to guide decisions. Clark Kelso, Dean of McGeorge School of Law, said at this committee’s recent informational hearing on arbitration, “You may be removing from the courts entire subject matter areas so that cases just don’t arise and that means the courts would not really have an opportunity to develop the law in that particular area.”

Will Money Or Policy Talk?

While nurses, consumer groups, seniors and labor unions such as the Teamsters stand behind SB 458, HMOs have spent heavily on campaign contributions to committee members. The committee members have received more than $400,000 in campaign contributions from HMOs and insurers during the 2001-2002 cycle. “This bill is simply about giving HMO patients a choice,” said Court. “There is not one good policy objection to this bill only political objections by HMOs that do not want their dirty laundry aired publicly and have been spending heavily to prevent it. This vote is a key litmus test of legislators’ consumer credentials, and whether they speak for patients who want choices or HMOs that want the prerogative of mistreating patients with impunity.”