Court: States can make HMOs pay for procedures
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Read Making a Killing

home / healthcare / in the media

The San Diego Union-Tribune
Jun 21, 2002

by Tony Fong, Staff Writer

Court: States can make HMOs pay for procedures

In a 5-4 decision, the U.S. Supreme Court ruled yesterday that states can force health plans to pay for procedures recommended by outside independent parties.

The decision, followed closely by the health-care industry, had particular significance for California and 41 other states where independent review statutes exist. In such states, if a health plan denies coverage for a procedure but an independent medical panel finds the procedure is necessary, the health plan must pay for it.

In the 42 states and Washington, D.C., that have independent medical reviews, a court decision in favor of health plans could have undermined regulators' ability to regulate the managed-care industry.

The decision affects about 70 million Americans who receive their health insurance through their employers. An additional 60 million who work for companies using self-insured plans are not affected, however, because federal laws govern such plans.

California's chief HMO regulator expressed relief at the ruling.

"It was a narrow escape for patient rights," said Daniel Zingale, director of California's Department of Managed Health Care, the agency created in 1999 as part of a sweeping patients' bill of rights that put HMOs under greater scrutiny and regulation. "The progress that we made . . . all of that was threatened with a rollback to the days when HMO patients had nowhere to turn."

The court's decision involved a case in which Debra Moran of Illinois wanted her HMO, Rush Prudential, to pay $98,000 for an operation to alleviate a compression of nerves on her neck.

The HMO refused, but an outside panel ruled the operation was medically necessary and ordered Rush to pay. Rush, which was bought two years ago by Wellpoint Health Networks, the parent company of Blue Cross of California, took the issue to court in 1998.

In its argument, the health plan said the federal Employee Retirement Income Security Act, known as ERISA, which governs most employee benefits plans, pre-empts state laws on independent reviews.

But Justice David H. Souter, writing for the majority, said ERISA does not address medical second opinions. Additionally, ERISA allows states to regulate the insurance industry, he wrote.

"Congress demonstrated an awareness of HMOs as risk-bearing organizations subject to state insurance regulation," Souter wrote.

Justice Clarence Thomas said in a dissent, however, that the ruling "undermines the ability of HMOs to control costs, which, in turn, undermines the ability of employers to provide health care coverage for employees."

Thomas was joined by Chief Justice William Rehnquist and Justices Antonin Scalia and Anthony M. Kennedy.

Wellpoint did not return several phone calls seeking comment.

In a statement, Karen Ignagni, president of the American Association of Health Plans, said health care decisions should be based on uniform standards and medical evidence.

"This decision makes more difficult the goal of a uniform review process to protect patients," she said.

As Congress tries to create a national patients' bill of rights, some, however, are pushing Congress to use the decision as impetus. Since Sept. 11, legislation on patients' rights has stalled.

Dr. Donald Palmisano, president-elect of the American Medical Association, said, "Congress still needs to act because the patients' bill of rights should apply to all citizens. We want to eliminate any gaps."

Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, a Santa Monica-based consumer organization, said: "The lesson Congress must take away is that HMOs will fight with all their money, power and resources if the corporations know that all they are responsible for is the cost of the benefit they should have provided in the first place."

In California, consumer advocates and even the HMO industry had expressed concern in recent months that the court could rule in favor of Rush.

The California Association of Health Plans' board of directors voted recently to urge its members to voluntarily comply with the state's independent review legislation if the court ruled the other way.

"We like our law, we want our law to work, and we think it's a critically important reform," said Walter Zelman, president of the association. "We think consumers should have the right to appeal a decision of their managed-care plan."

Since the state implemented independent reviews in January 2001, about 800 complaints from patients about their HMOs coverage decisions have gone to an independent review, Zingale said. Sixty-five percent of the time, reviews have upheld the decision of the HMO.

More importantly, though, the mere possibility of an independent review has changed the behavior of HMOs, Zingale said.

"Thousands (of disputes) have been resolved before it's gone to that level because HMOs don't want it to get there," he said.
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Tony Fong: (619) 293-1515; tony.fong@uniontrib.com


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