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Read Making a Killing

home / healthcare / in the media

Chain Drug Review
Oct 11, 1999

California Sets New Standards

SACRAMENTO, CA -- California, which has been a leader both in the development of the managed care industry and in the regulation of that sector of health care, is implementing new laws that will allow patients to file lawsuits against health maintenance organizations in cases in which they feel they have been substantially harmed by a health insurer's decision to alter, delay or reject treatment.

Managed care plans and other health insurers will also be required to provide a second opinion when a patient requests it and to provide coverage in such areas as diabetes treatment and cancer screening.

To enforce the laws Governor Gray Davis has approved a new state agency (the department of managed care) that will regulate health care plans, a responsibility that had been overseen by that state's department of corporations.

Affected by the changes are an estimated 15 million California patients who are covered by employer-purchased managed care plans, many of which restrict their choice of physicians in exchange for reduced fees for prescriptions and checkups and lower premiums.

The first component of the legislation establishes an independent review system for patients who claim a managed care plan has unfairly changed, delayed or denied their treatment. Physicians without a stake in such disputed cases would be allowed to help resolve them.

Patients who disagree with the outcome would be allowed to sue for compensatory and punitive damages under the new liability law if they have suffered substantial injury as a result of the actions of the health plan. The law describes substantial injury as loss or significant impairment of limbs or bodily function, major disfigurement, chronic or severe pain or significant financial loss.

Consumer groups pressing for change as well as the state's HMO industry have voiced their support for the changes. Jamie Court, advocacy director of the Foundation for Taxpayer and Consumer Rights, says that the threat of lawsuits -- even if they are never filed -- will help patients by placing pressure on companies to make medical concerns a priority.

Walter Zelman, president of the California Association of Health Plans, contends that even though the cost of lawsuits could result in increases in premiums, the new laws are superior to some of the proposals previously proposed.

In particular, he praises the bill that provides for outside reviews of HMO decisions that deny coverage.


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