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Jun 21, 2004
by Kristen Gerencher, CBS.MarketWatch.com
Aetna, Cigna win Supreme Court ruling on HMO suitsWASHINGTON -- People angry at being denied health care coverage by their health maintenance organizations cannot sue over these decisions, the Supreme Court ruled Monday.
The court rendered its decision after reviewing the case of two patients in Texas who had separately sued Aetna (AET) and Cigna (CI) in state court, when the HMOs refused to cover certain medical services.
In a unanimous decision written by Justice Clarence Thomas, the Supreme Court said such state complaints are preempted by the federal Employee Retirement Income Security Act, known as ERISA. "The purpose of ERISA is to provide a uniform regulatory regime over employee benefit plans," Thomas wrote in his opinion.
The court said medical judgments are similar to decisions on employee pensions and other benefits.
Congress has been unable to agree on legislation that would allow patients to sue HMOs, an issue that may become part of the presidential campaign.
The Democratic candidate, John Kerry, issued a statement saying the court's move "underscores the need for a real patients' bill of rights, one that would hold HMOs accountable for decisions that harm patients by denying necessary care.
"A real patients' bill of rights has bipartisan support, and it could become law tomorrow if the Bush administration was not standing in the way," Kerry added.
Sen. John Edwards, D-N.C., agreed that the ruling highlighted the need for a national patient-protection law.
'Nowhere to go'
"Millions of working people still have nowhere to go when HMO bureaucrats overrule their doctors' decisions," said Edwards, a former trial lawyer, in a statement.
Several states, including Texas, have passed legislation allowing patients to sue HMOs, but the Supreme Court agreed with the HMOs that federal law bans such suits. Arizona, California, Georgia, Maine, New Jersey, North Carolina, Oklahoma, Oregon, Washington and West Virginia also have passed similar laws allowing patients the right to sue.
Aetna's shares slipped $1.69, or 2 percent, to close at $83.93 Monday, while Cigna dropped $1.90, or 2.7 percent, to $67.25.
The cases are Aetna Health Inc. v. Davila and Cigna Healthcare of Texas Inc. v. Calad.
Reaction to the verdict was split. Consumer groups decried it, saying patients who have been harmed by HMOs now have virtually no recourse in cases of negligence and medical malpractice. But the health care industry applauded Monday's ruling, saying it would serve to rein in rising medical costs.
Karen Ignagni, president of America's Health Insurance Plans, hailed the ruling as a victory for employers and consumers. "There is already far too great a reliance on using the courts to resolve disputes in health care," she said in a statement.
"We will continue to support existing alternative approaches for consumers to solve their disputes fairly and quickly, and in ways that promote access, affordability and quality care," Ignagni added.
Mark Merritt, president of the Pharmaceutical Care Management Association, said the court's decision "is a huge loss for the trial lawyers and strikes a blow for all who are concerned about keeping high-quality prescription drug coverage affordable for working families, retirees and employers... This ruling will reverberate across the employee benefit landscape for years to come."
Nevertheless, the Foundation for Taxpayer and Consumer Rights, or FTCR, accused President Bush of creating a double standard for certain employees and violating campaign promises.
Early in his administration, Bush pushed for a compromise on the so-called patients' bill of rights, which was designed to guarantee such things as access to emergency-room treatment and pediatric care for children, but he backed off when public interest waned.
The Supreme Court decision resolves the contentious issue of whether patients can sue their HMOs and collect punitive damages. By limiting such cases to federal courts, damages are restricted to recovering the cost of whatever medical services were denied.
In a letter to the president sent Monday, the FTCR wrote that the ruling "will mean that patients who have been harmed by HMOs have no remedy, no matter how egregious the mistreatment or serious the injury, unless they are government officials, church workers or on public assistance programs -- people not subject to preemption" under ERISA.
'Green light' to deny coverage?
Sally Greenberg, senior counsel for Consumers Union, argued the ruling leaves "a gap in meaningful remedies for patients."
"This is a call to Congress to step in and to address the tangled ERISA regime that's currently preventing patients from holding HMOs and others accountable when they're wrongfully denied coverage," she said.
"We have seen substantial progress in addressing these issues because of lawsuits on the state level," Greenberg added. "The concern is the HMOs and others may have a green light to deny coverage because they realize now there may not be remedies available."
Managed care companies' cost-cutting measures may leave many patients without access to the care they need, according to Greenberg: "In a number of cases, the decision has been life-threatening. In some cases, people have died because profits were placed above the needs of the patient."
The American Medical Association, which represents about 250,000 U.S. doctors, asserted the ruling allows HMOs to "play doctor" with treatment decisions.
"Managed care plans will now have very little incentive to approve expensive but medically necessary treatments," said AMA President John C. Nelson.
Kristen Gerencher is a reporter for CBS.MarketWatch.com in San Francisco.
Contact her at: email@example.com
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