March 3, 2000

Members of the California Assembly & Senate

State Capital

Sacramento, CA 95814

Re: Consumer Group Support for AB 1751 — Making HMO Arbitration Voluntary

Dear Members of the Assembly and Senate:

We are writing to express our shock at recent misinformation distributed by the California Association of Health Plans about Assemblywoman Sheila Kuehl‘s patient protection bill, AB 1751. Contrary to the implications of the Health Plans’ statements, we believe your constituents should never have to choose between access to health coverage and the right to trial should an HMO injure them. Assemblywoman Kuehl’s is certainly not a radical bill: it simply precludes HMOs from forcing patients to give up their trial rights as a condition of obtaining health coverage.

The HMO industry has deluged your houses with misinformation intended to dissuade you from supporting AB 1751 under the notion that it is a radical reform. In fact, in 1998 a commission of the American Medical Association, American Arbitration Association and American Bar Association (hardly radical organizations) unanimously supported the reform embodied in AB 1751. In its July 27, 1998 report, “Health Care Due Process Protocol,” the panel wrote, “the Commission’s unanimous view is that in disputes involving patients and/or plan subscribers, binding arbitration should be used only where the parties agree to same after a dispute arises.”

Kaiser Permanente, the state’s largest HMO, has claimed AB 1751 targets that HMO’s arbitration system, which was roundly condemned by the California Supreme Court in 1997 as “a self-administered arbitration system in which delay for its own benefit and convenience was an inherent part, despite express and implied contractual representations to the contrary,” and which the HMO claims to have fixed. In fact, AB 1751 is not targeted at Kaiser, but addresses all HMO forced arbitration systems and the lack of public accountability and leverage for the consumer these forced systems engender.

Walter Zelman, executive director of the California Association of Health Plans, told the San Diego Union Tribune that consumers today have an option to avoid mandatory binding arbitration because they can join an HMO that does not require it. Such a statement is intellectually disingenuous. All major commercial HMOs require binding arbitration. Zelman’s organization itself reported on February 10, 2000 to the Assembly Judiciary Committee: “Fifteen of the 19 health plans responding use binding arbitration, at least for some enrollees. Of the four that do not use binding arbitration, three of these plans are local initiatives or county organized health plans.” Unless AB 1751 passes, there will be no meaningful choice for patients. Further, many employees are not given the option by their employer of choosing another health care provider.

Patients complain frequently that forced arbitration can be lengthy, costly and unfair. It also conceals repeated quality of care violations from public scrutiny.

o Arbitrators often depend on repeat business from HMO corporations and are more likely to rule in their favor.

o Patients complain of abuse by attorneys that are not subject to discipline by judges.

o Arbitrators generally charge $200-$400 per hour, compared to $350 per day for court costs.

o Abuses or documents uncovered in the arbitration process are not public record.

o There is no jury of one’s peers, publicly accountable judge or media scrutiny.

o There is judicial review only in cases of outright fraud, not judicial error. (“Thus even though an error of law appears on the face of an arbitration award and causes substantial injustice it is not subject to judicial review.” Moncharsh v. Blase, California Supreme Court, No. S-02099-7.)

We believe once you have a chance to focus on this issue, an issue so fundamental to you and your own family’s right to proper health care, you will see through the cynical nature of the health plans’ arguments against this bill. We urge your careful scrutiny of all information provided by the California Association of Health Plans, and urge you to support AB 1751.

Sincerely,

Jamie Court

Foundation For Taxpayer and

Consumer Rights

Peter Szego

American Association of Retired Persons

Betty Perry

Older Women’s League of California

Dave Low

California School Employees Association

Howard L. Owens

Consumer Federation of California

William Powers

Congress of California Seniors

Sara Nichols

Neighbor To Neighbor