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home / healthcare / press releases

NEWS RELEASE
Apr 06, 1999


CONTACT: Jamie Court - 310-392-0522 x327

Association of 25,000 Small Businesses Supports HMO Liability in CA

Poll Shows 66% of Small Bix Executives Support Right-to-Sue Your HMO Bill
The American Small Business Alliance, a national network of more than 25,000 small businesses, has announced support for California Senate Bill 21 (Figueroa), legislation to allow all patients the right to sue their HMO for quality of care violations and for acting in bad faith. The bill will be considered by the California Senate Judiciary Committee Tuesday afternoon.

Public employees can sue their HMOs for damages today, but patients with private industry employer-paid health coverage cannot due to a federal employee benefits law. Under the Employee Retirement Income Security Act of 1974 or ERISA, patients can only recover the cost of the benefit denied.

"If ERISA rules applied to bank robberies, convicted criminals would simply have to give back the money," said Jamie Court, director of Consumers For Quality Care, sponsor of SB 21. " It is no wonder HMO abuses have become epidemic. All working Californians should have the same right to sue their HMOs for damages as their public officials now have. Without the threat of damages, patients will continue to have no leverage against billion dollar HMOs that deny and delay medically necessary care."

SB 21 is based on a model Texas law, in effect since September 1997, that has resulted in doctors reporting that HMOs now defer to their treatment requests. Yet only one lawsuit has actually been filed under the law, deflating industry arguments that it would result in a flood of litigation.

Joel Marks, executive director of the Washington D.C.-based American Small Business Alliance, noted a national survey of 800 small business executives by the Kaiser Family Foundation at today's hearing in Sacramento. The survey found 66% of small business executives support enacting a new law to allow patients to sue their HMO as a way to make sure people get the care they need, rather than oppose it as unnecessary government intrusion.

"The California Chamber of Commerce has stood with the HMO industry in opposing patients rights legislation, and in this case the Chamber has stood up for big insurance and against small businesses," said Marks. "Small business people care about their employees' welfare and support giving patients the legal leverage they need to force HMOs to provide medically necessary care. HMO liability is a non-governmental, non-regulatory, free market solution to the HMO crisis."

In the Kaiser survey, fewer than 1% of employers said they would consider dropping coverage for their employees if the patients rights legislation was enacted and costs rose moderately.

Also testifying in support of the legislation was Dr. Robert Weinmann of the Union of American Physicians and Dentists, AFSCME, AFL-CIO; the California Nurses Association; consumer group Neighbor To Neighbor; the Center For Public Interest Law; HMO patient Bill Beaver who was denied cancer treatment by his HMO and forced to finance a cure himself, but has no remedy because he is covered by ERISA.

Innovating With Texas Model

The Texas HMO liability law was upheld in by the U.S. District Court for the Southern District of Texas on September 18, 1998 under the reasoning "ERISA simply says nothing about the quality of benefits received." (Ironically, the Court rejected, as preempted by ERISA, Texas's independent review process, a proposal favored by the HMO industry.) SB 21 allows for the same right to sue over such quality of care violations as enumerated in the Texas law.

In addition, SB 21 also innovates by making use of a "savings clause" in ERISA -- which allows states to regulate the business of insurance without being superceded by ERISA. SB 21 defines an HMO as an insurer and codifies as part of the state's insurance regulatory scheme the right to sue HMOs that administer employer-paid benefits when they breach the duty of good faith and fair dealing (the same right exists currently for public employees under state common law).

Last year, Consumers For Quality Care faxed a different story and picture of another "ERISA Casualty of the Day" -- a patient denied treatment by an HMO or insurer and without a remedy -- to legislators and the media for five months. This year, the consumer group is tracking HMO liability legislation in 23 states.

Consumers For Quality Care is a health care watchdog project of the non-partisan, non-profit Foundation For Taxpayer and Consumer Rights.

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