Supreme Court may test HMO members’ right to seek second opinion

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Dallas Morning News

WASHINGTON _ At least 38 states have passed laws giving HMO members the right to seek an independent medical opinion if their insurer denies a treatment or test.

But can a state force an HMO to abide by the arbitrator’s decision? The answer depends on where you live.

In Texas, the answer is no, according to a federal appeals court ruling this summer. In Illinois, the answer is yes, another appeals court declared last week.

The conflicting decisions create uncertainty about an out-of-court process lauded by both supporters and opponents of HMO reform in Congress _ setting up what many legal experts consider a perfect test case for the U.S. Supreme Court.

“Not only is there a clear conflict, but this is a terribly important issue,” said Marc Machiz, a health law partner with Cohen, Milstein, Hausfeld & Toll in Washington. “I don’t see the court letting this one go by.”

Machiz will soon find out: The Texas attorney general’s office sent an appeal earlier this week to the Supreme Court, seeking to reinstate the mandatory review process.

Judging by the numbers, the chances of a Supreme Court hearing are slim. The justices review only about 1 percent of the petitions received each year. And the high court already handled one HMO case this year _ upholding a health plan’s right to offer doctors financial incentives to limit care.

However, legal experts who have studied the appeals courts’ decisions predict that a higher authority will step in to clarify the situation.

“The two decisions, to me, cannot be reconciled. They’re just squarely opposed,” said Timothy S. Jost, a professor of health law at Ohio State University. “This is something that’s going to have to be settled eventually, either by the overwhelming majority of courts of appeals going one way or the Supreme Court sorting it out.”

Federal appeals courts each have jurisdiction over a handful of states. So when courts disagree, identical laws can take on different meanings in different states. The 5th Circuit U.S. Court of Appeals controls Texas, Mississippi and Louisiana. The 7th Circuit has oversight over Illinois, Indiana and Wisconsin.

In June, the 5th Circuit in New Orleans invalidated the Texas review provision, enacted in 1997. A three-judge panel ruled that the state-mandated process violates the federal Employee Retirement Income Security Act of 1974, which created a uniform standard for employee benefit plans.

The Texas process substituted the medical judgment of an outside physician for the decision of the HMO, which violates the law, the court explained. Its ruling came in a lawsuit filed by subsidiaries of Aetna Inc., the nation’s largest health insurer.

Aetna challenged the 1997 law primarily because it gave Texas patients the right to sue their health plans for medical malpractice damages. In doing so, the insurer also challenged the appeals process, which it says it supports.

In the ruling, the 5th Circuit panel upheld the right to sue, the first law of its kind in the nation.

Little more than four months after the Texas ruling, the 7th Circuit in Chicago cited respectful disagreement and upheld an Illinois law that is nearly identical to the Texas measure.

The 7th Circuit concluded that the Illinois legislature did not intend to take power away from HMOs. Rather, the court said, the state simply crafted a mechanism to make decisions “in those instances when the HMO and the patient’s primary care physician cannot agree on the medical necessity of a course of treatment.”

“This does a lot toward lifting the dragnet that HMOs have thrown over every patient case to date,” said Jamie Court, executive director of Foundation for Taxpayer and Consumer Rights in Santa Monica, Calif.

Yet, four judges on the 7th Circuit disagreed with their colleagues’ decision and said it could cause employers to drop their health insurance coverage. “The panel’s decision creates a square conflict with another circuit, is very probably unsound, and will affect an enormous number of cases,” wrote Circuit Judge Richard Posner.

The decision came in the case of an Illinois woman who requested complicated nerve surgery in 1998, but Rush-Prudential HMO said no. The woman paid $94,841 for the surgery out of pocket and then sought reimbursement.

WellPoint Health Networks Inc., which now owns Rush-Prudential, said it is disappointed with the decision and is considering its options, including a Supreme Court appeal.

So far, the 5th Circuit decision hasn’t had an effect on the state’s HMO members. Health insurers in Texas have continued to participate in the appeals process voluntarily despite the 5th Circuit’s ruling.

“The independent review organization has been an enormously, enormously helpful process in terms of allowing the people to have their day in court, so to speak, in an inexpensive fashion,” said Texas insurance commissioner Jose Montemayor. “People get a chance to get an arm’s length, impartial review that’s credible.”

Indeed, many industry representatives say, patients should have the right to seek an outside opinion if they disagree with insurers. Certainly, these officials say, that option is far more preferable to suing HMOs.

“You don’t see health plans in any other states challenging external review laws,” said Louis Saccoccio, general counsel for the American Association of Health Plans. “For the most part, they’re satisfied with those laws and willing to work with those laws.”

Although a vast majority in Congress supports federal legislation mandating independent appeals, the issue has died because of partisan fighting over the right to sue. That’s not the case at the state level, where 10 legislatures approved external review processes this year, according to the National Conference of State Legislatures.

Texas regulators say they received 1,079 requests for appeals between November 1997 and September 2000. Of the cases decided, experts upheld the insurer’s decision 42 percent of the time and overturned it 50 percent. The remaining 8 percent were partially overturned.

Despite the voluntary action, Montemayor and other Texas officials have voiced concerns that HMOs could drop out at any point under the voluntary system currently in place.

“The problem is, of course, if we can’t enforce it, there’s no guarantee that they will continue to do it,” said David Mattax, chief of the Texas attorney general’s financial litigation division. “If it’s voluntary, they could stop any time or not send the hard cases to us.”

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