HMO Liability Will be Center of HMO Reform Debate in ’99

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23 States to Introduce Bills in New Legislative Sessions

Legislators in 23 states across the nation have made commitments to Consumers for Quality Care that they have, or will, introduce HMO liability bills in 1999. The proposed legislation allows all patients to hold HMOs accountable for quality of care violations.

Currently, workers with employer-paid healthcare in the private sector are prevented from recovering damages from HMOs who delay and deny medically-appropriate treatment by the federal Employee Retirement Income Security Act of 1974, or ERISA.

A Texas liability bill, SB386, that was enacted into law in 1997, provides the model for other states’ legislation. The landmark Texas law bypasses ERISA by allowing damages for quality of care violations or medical negligence – which Courts have upheld as within the states’ provinces – as opposed to bad faith and other coverage disputes, which are clearly preempted by ERISA.

“HMOs and insurance corporations remain the only industry in the nation that is not subject to the same legal accountability that other industries face in the wake of wrongdoing,” said Andrew Pontious, a patient advocate with Consumers for Quality Care, the Santa Monica-based, consumer watchdog group. “All patients should have the right to sue injurious HMOs that government workers now have.”

Paralysis in Washington at the end of the last legislative session delayed hopes of a nationwide HMO liability law from Congress and further emphasized the need for accountability legislation at the state level.

Record-Setting Goodrich Decision Against Aetna in California Sets Tone for Reform

The enthusiasm at the state level for liability reform was bolstered last week by a record jury verdict in a California case against Aetna U.S. Healthcare. The widowed wife of David Goodrich was awarded $120.5 million in damages after the jury found the HMO guilty of delaying approval of an experimental bone marrow transplant that might have saved his life. Teresa Goodrich was only allowed to sue because David was employed by San Bernardino County as a deputy district attorney.

“This verdict highlights just how adamant the public is at telling the HMO industry that they are fed up with the way their care is mis-managed,” continued Pontious. “It would be shameful for Congress to allow the ERISA legal paradox to continue any longer.”

At Least 23 States Will Have HMO Accountability Bills in ’99

HMO liability legislation in at least twenty three states will allow patients the right to hold their HMO accountable when the HMO harms them. Though no HMO liability bills were enacted into law in the last session, 28 states initially proposed such legislation. The growing list of states introducing HMO liability bills (along with their respective sponsors) includes:

California (Sen. Liz Figueroa-D)

Connecticut (Sen. Edith Prague-D)

Colorado (Rep. Dan Grossman-D and Sen. Mary Ellen Epps-R)

Delaware (Sen. David Sokola-D)

Florida (Rep. Larry Crow-R)

Georgia (Sen. Nadine Thomas-D)

Illinois (Rep. Mary Flowers-D)

Indiana (Rep. Scott Pelath-D and Rep. Craig Fry-D)

Maine (Rep. Joseph Brooks-D)

Maryland (Rep. Sharon Grosfeld-D and Rep. Leon Billings-D)

Massachusetts (Sen. Mark Montigny-D)

Michigan (Rep. Laura Baird-D)

Minnesota (Rep. Tom Huntley-D)

New Hampshire (Gov. Jeanne Shaheen-D)-will introduce an administrative liability bill in the House

New Jersey (Rep. Reed Gusciora-D)

New York (Rep. Richard Gottfried-D)

Ohio (Rep. Jeff Jacobson-R, Rep. Betty Sutton-D, Rep. Randy Gardner-R and Rep. Patrick Tiberi-R)– three House bills from ’98 session are still alive in committee

Pennsylvania (Sen. Clarence D. Bell-R)

Rhode Island (Rep. Susan Henseler-D and Rep. Roger A. Picard-D)

Tennessee (Sen. Randy McNally-R)

Vermont (Rep. Anne D. Pugh-D)

Virginia (Rep. Aston McEachin-D)

Washington (Rep. Eileen Cody-D)

With Model Texas Law Upheld, Other States Set To Enact Liability Laws

State legislatures were given a boost in September 1998 when U.S. District Judge Vanessa D. Gilmore upheld the Texas liability law in her decision on a suit by Aetna Inc. Aetna had challenged the Texas law– a model for other states in the country– on the basis that it was preempted by ERISA. The Court ruled that HMOs, like doctors, can be sued in state court for quality of care violations, which, unlike coverage disputes, are not preempted by ERISA.

By contrast, the Court struck down the independent review process as preempted by ERISA, because it deals with determinations of coverage disputes. The review process is the HMO industry’s alternative to liability.

“With the legal questions behind them, states can finally end the vacuum of accountability that now exists for these HMOs,” stated Pontious. “The fact that nearly half of the states in the nation are taking it upon themselves to reform the health care system tells us that mis-managed care problems are running rampant in this country. Most of the states that will not see legislation proposed this year simply do not yet have the HMO strongholds in place that haunt the others. But every indication tells us they are on their way,” Pontious concluded.

States Will Address HMO Reform Through the Initiative Process Should Legislation Fail

Adamant about passing laws holding HMOs accountable for interfering in treatment decisions, many states have indicated that they will utilize the initiative process of lawmaking in the event that HMO liability legislation fails in their state legislatures. Initiatives allow citizens, through a petition, to place a law on the ballot that is subject to voter approval.

“Initiatives give citizens the ability to pass laws that the legislature is neither willing or able to enact themselves. If lawmakers at the state level continue to stall or oppose HMO liability then their constituents will take it into their own hands, ” added Doug Heller, advocate for Consumers for Quality Care.

In California, SB21 Will Allow Patients To Sue HMOs For Medical Negligence

Under Senate Bill 21, all California patients could recover damages from HMOs that delay and deny them medically necessary treatment. The legislation was introduced in December by California State Senator Liz Figueroa (D-Hayward) and is co-sponsored by Consumers for Quality Care and the California Nurses Association.

SB21 holds HMOs accountable for interfering in treatment decisions and allows all patients to recover damages against HMOs that “exercised influence or control which result in the failure to exercise ordinary care.” 15 million Californians with private-sector, employer-paid healthcare cannot sue their HMO for damages because their state court remedies are superseded by ERISA.

“The new political environment in California is primed and ready to enact real patient protection law and SB21 is that law. It will provide patients with much-needed legal leverage that will end an era of HMO corporate profiteering and harken the era of quality patient care,” added consumer advocate Doug Heller of Consumers for Quality Care.

Modeled after the language in the landmark 1996 Texas liability law, the remedies available under SB21 skirt ERISA’s preemption because the bill provides damages for quality of care violations or medical negligence- which Courts have upheld as within the state’s province- instead of damages for bad faith and other coverage disputes, which are clearly preempted by ERISA.


Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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