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ERISA is a federal statute that regulates employee welfare benefit plans such as health insurance plans offered by HMOs. Under ERISA, the plan administrators have a fiduciary obligation to act in the best interest of the insureds when making decisions relating to managing, advising and administering an ERISA plan. ERISA limits the damages a plaintiff can receive to the cost of the medical care they were denied. All claims under ERISA must be heard in federal court.
When an Illinois patient attempted to sue her HMO in state court claiming the HMO fraudulently interfered with their access to medical care, the claim was transferred to federal court under the ERISA statute since it related to the provision of health insurance benefits. The patient then looked to ERISA to shoot down financial incentives offered by HMOs to keep costs down. The patient claimed that her doctor failed to order an ultrasound to diagnose appendicitis in a timely manner in an effort to cut costs. The patient claimed that the HMOs’ financial incentives cause physicians to act in furtherance of their own self-interest rather than the patient’s best interest and constitutes a breach of their fiduciary duty under an ERISA health care plan. The HMO named in the lawsuit claimed that the physician who made the treatment decision was not a fiduciary under the health care plan, and had no such fiduciary duty.
Since the issue of whether a treating physician acts a fiduciary under an ERISA was unresolved among the federal courts, the U.S. Supreme Court heard the case and issued an opinion. The Supreme Court held that HMO physicians do not make administrative decisions about ERISA health care plans in the capacity of manager, administrator or financial advisor. The Court explained that fiduciary duties under ERISA plans are generally related to decisions about managing assets and distributing property to the beneficiaries. Since medical treatment decisions do not directly impact property distribution of the benefits under the plan, treating physician do not qualify as fiduciaries under ERISA plans.
Although the U.S. Supreme Court decision seems to limit the legal remedies available to patients under ERISA, a recent Illinois Supreme Court case upheld a patient’s attempt to sue an HMO in state court. This patient brought suit against the HMO claiming it negligently assigned her to a primary care physician who already had to many patients to care for and that the HMO negligently adopted procedures which required her to call for a doctor’s appointment before receiving emergency medical care. The State Supreme Court overturned the order of dismissal in favor of the HMO made by the lower court and held that the HMO may be held liable for the patient’s claims of negligence.
In addition to proposing new theories of liabilities to blame HMOs for negligent medical treatment, patients are still trying to hold HMOs accountable in medical malpractice cases. These attempts are somewhat limited in majority of states whose laws provide that only the employer of a negligent physician may be held vicariously liable for the negligent treatment. Some states, such as Texas, are beginning to enact legislation to give patients a new mechanism to name HMOs in medical malpractice cases. Texas enacted a law which expressly allows patients to sue their HMO in state court for negligent medical care. A recent decision by the U.S. Court of Appeals for the Fifth Circuit upheld that portion of the statute. The other portion of the statute which would have allowed claims of medical malpractice based upon an appeal of the denial of insurance benefits was struck down on the grounds that it was preempted by ERISA.
In addition to patients who are gaining access to naming HMOs in lawsuits, medical boards are beginning to discipline HMO medical directors for denying patients treatment which is medically necessary. In Texas, the Medical Board investigated a licensed physician who was medical director of an HMO for denying private duty nursing care coverage to a thirteen year old child requiring home ventilation services who died of a brain aneurysm. The Board’s attempts to discipline the medical director have been stalled by a lawsuit filed by the HMO. The Board has proposed a settlement of the disciplinary proceedings which would require a two year probated suspension of the doctor’s license, a $5,000 fine, and twelve hours of continuing education regarding ventilator training.
The legislative efforts made by Illinois and Texas are likely to open the door for more injured patients to pursue claims against their HMO, and will likely serve as a sounding board for patients across the United States to keep HMOs in check. HMOs have traditionally defended medical malpractice cases by arguing that they make insurance coverage as opposed to medical treatment decisions. This type of defense may no longer shield HMOs from liability in state medical malpractice lawsuits.
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