New Legislation To Ban Pre-Dispute Forced Arbitration At HMOs

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Assembly Member Sheila Kuehl and the Foundation for Taxpayer and Consumer Rights (FTCR) announced new California legislation requiring that HMOs cannot force patients into pre-dispute binding arbitration as a condition of health coverage.

The bill, authored by Kuehl and sponsored by FTCR, guarantees that HMO arbitration be voluntary entered into only aftera dispute arises. Under state HMO liability legislation, passed in 1999 and to take effect in 2001, patients will be able to recover damages from an HMO that interferes with the quality of their care. But an HMO enrollment contract can still force patients into a private arbitration system controlled by private lawyers, rather than by a judge or jury.

In 1998, a joint commission of the American Bar Association, American Medical Association, and American Arbitration Association concluded “In disputes involving patients, binding forms of dispute resolution should be used only where parties agree to do so after a dispute arises.”

“Patients should not have to sign away their right to a court trial simply because they join an HMO,” said Jamie Court, FTCR’s advocacy director. “HMOs must know that they will face the eyes of jurors when they deny and delay medically necessary treatment and serious harm results. Repeated quality of care violations at HMOs should not be hidden behind the curtain of mandatory arbitration. Standards agreed to by the American Bar Association, American Medical Association and American Arbitration Association should be good enough for Californians.”

Forced arbitration can be lengthy, costly, unfair, and conceals quality of care violations from public scrutiny.

  • Arbitrators often depend on repeat business from HMO corporations and are more likely to rule in their favor.
  • Patients complain of abuse and delays by attorneys who are not subject to discipline by judges.
  • Arbitrators generally charge $100-$400 per hour, compared to $350 per day generally for court costs.
  • None of the abuses or documents uncovered in the process can be made

  • There is no media scrutiny, publicly accountable judge, or jury of one’s peers.
  • There is judicial review only in cases of outright fraud, not judicial error.1

Assembly Member Kuehl said, “I was thrilled with Governor Davis’ leadership and vision in granting Californians the right to finally have their disputes with their HMOs heard by a jury of their peers. HMOs must not be allowed to subvert the Governor’s and the Legislature’s patient protections in this area. Private arbitration is just that: private. My bill will protect patients and make sure that HMOs can finally be held accountable to the patients and the public.”

Aina Engalla Konold, daughter of a Kaiser lung cancer patient who faced gross delays in the Kaiser arbitration system that were condemned by the California Supreme Court, said, “My dad had hoped to have his day in court. Kaiser knew he was dying. He was their patient and he was on oxygen when they took his deposition. But Kaiser only stalled and made us wait until after my father had died. He never got to tell his story or see the result of his case.”

FTCR filed a “friend of the court” brief in the landmark 1997 California Supreme Court decision, Engalla vs. Permanente Medical Group, where the Court sided with FTCR and found that Kaiser, the nation’s largest HMO, “established a self-administered arbitration system in which delay for their benefit and convenience was an inherent part, despite express and implied contractual representations to the contrary.”

The Engalla family claimed that Kaiser had failed to diagnose 51 year old Wilfredo Engalla’s lung cancer until it became inoperable, and then, to avoid liability, intentionally stalled the case until after Wilfredo’s death — when his family could recover no compensation for Wilfredo’s pain and suffering. Data produced during the court case showed that while Kaiser promised an arbitrator would be appointed within sixty days, it took, on average, two years for arbitrators to be appointed.


1“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.Blasé California Supreme Court, No. S-02099-7.

Consumer Watchdog
Consumer Watchdog
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