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Read Making a Killing

home / healthcare / in the media

The San Diego Union-Tribune
Jan 12, 2001

by Tony Fong

HMO dispute setup flawed, report finds

A state report has found that arbitration used by most health plans to resolve disputes is deeply flawed at the expense of consumers.

Along with being costly for patients, arbitration is unfairly tilted in favor of health plans, according to the report issued yesterday by the California Research Bureau, the Legislature's research arm. It was done at the request of state Sen. Sheila Kuehl, D-Santa Monica.

Eighty percent of managed-care enrollees in California -- more than 18 million people -- are in health plans requiring that coverage disputes be resolved by arbitration instead of civil litigation, often without the patient's knowledge, the report said.

The Research Bureau also found that health plans may not be complying with legal requirements to notify the state of arbitration cases.

"I think that patients should be much more upset than they are about binding arbitration (clauses) in their contracts," Kuehl said.

As of Jan. 1, Californians have the right to sue their health plans for denial or delay of care, but mandatory arbitration effectively eliminates that right, Kuehl said.

Jamie Court, executive director of the Foundation for Taxpayer & Consumer Rights, an advocacy group, added that "with a new HMO liability law in effect . . . it's more critical than ever that patients with HMO problems not be kept out of court by forced arbitration agreements."

The managed-care industry disputed the findings, saying problems in the arbitration process are a "nonissue."
"I think the report is somewhere between inaccurate and misleading," said Bobby Pena, a spokesman for the California Association of Health Plans.

This is not the first time that the arbitration system has been questioned. In 1997, the state Supreme Court found parts of Kaiser Permanente's arbitration system fraudulent, prompting the nonprofit health plan to overhaul its process. The plan covers 6 million Californians, including 502,000 in San Diego County.

In subsequent years, bills have been floated through the Legislature aimed at getting rid of mandatory arbitration clauses in health plan contracts. None has passed, however.

This year Kaiser plans to sponsor a bill to provide consumers more rights in the arbitration process, but it would stop short of making it a voluntary process, which Kuehl is seeking.
"We want health-care dollars to be used for health care, not for litigation," said Jim Anderson, a spokesman for Kaiser, based in Oakland.

Though the latest report covers 50 health plans that operate in the state, it draws most of its data from Kaiser.

The report found that in arbitration cases, there was a much higher likelihood of dismissal in favor of a health plan. Though health plans say arbitration cases are less costly to resolve than court cases, the report pointed out that "arbitration is expensive, at least for patients on normal budgets."

And because health plans are "likely to have repeated experiences with individual arbitrators," the report said, "(they) are in a good position to make informed decisions when choosing an arbitrator for a case . . . whereas patients may not be as well-informed."

The authors of the report concluded that many health plans are probably ignoring state laws requiring them to report to the Department of Managed Health Care when a dispute is brought to arbitration.

According to the report, roughly 300 arbitration cases are decided each year, but in 1999, only 171 arbitrations were reported to the Department of Managed Health Care, of which 168 were filed by Kaiser Permanente.



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