News
MCLE
Aug. 1, 2001
MCLE Self Study
A new California statute may expand the right to sue health maintenance organizations.
The Right to Sue HMOs
By Brian S. Kabateck and Erin K. Moore
Edited by Peg Healy
Category: Insurance
Suppose your client has a rare form of cancer and wants to undergo promising treatments at a reputable research hospital. But the client's health insurance plan denies coverage for "experimental" treatment, even though the cancer is so rare that there are too few cases to create a clinically valid sample. Can you sue the plan for wrongful denial of benefits? Although there is no simple answer, the legal landscape has recently improved for your client.
Federal law that regulates health plans obtained through private employers has traditionally preempted suits in state court for wrongful denial of treatment. This preemption has affected an estimated 70 percent of all health care plan enrollees in California. In contrast, suits against health plans obtained through public employers are not preempted: Such plans have been found liable for millions of dollars for wrongful denial of treatment, including punitive damages. See, for example, Fox v Health Net (Riverside County Superior Court) Civ No. 219692 (December 1993); Goodrich v Aetna Life & Cas. Co., Inc. (San Bernardino County Superior Court) Civ No. RCV020499 (January 1999).
In 1999 the California Legislature enacted the Managed Healthcare Insurance Accountability Act (CC §3428) to correct this inequity and to expand tort recovery for patients who are unreasonably denied treatment after 2000. Under the act, health care service plans and managed care entities may be held "liable for any and all harm legally caused by [the] failure to exercise ordinary care" in arranging for the provision of medically necessary health care services. The act permits all state law remedies (CC §3428(h)), including tort and bad faith damages. A bill pending at press time (SB 458, Escutia D-Montebello) is expected to clarify that this remedy is available in a court of law, regardless of mandatory arbitration clauses.
The ERISA Hurdle
Prior to the Accountability Act, the federal Employee Retirement Income Security Act of 1974 (ERISA, 29 USC §§100 et seq.) prevented most patients from suing their HMOs in state court for unreasonable denial or delay of treatment approval by preempting state law claims as to private employee benefit plans (29 USC §1144). ERISA was enacted as a means to curb abuses of company and union pension plans. However, ERISA has been broadly applied to cover health care benefit plans. 29 USC §1002(1) (definition); Pilot Life Ins. Co. v Dedeaux (1987) 481 US 41 (long-term disability employee benefit plan).
ERISA has had the unintended effect of preventing patients from bringing meritorious lawsuits relating to most benefit plans in state court for two reasons: (1) ERISA preempts all state laws, including statutory and common law tort remedies, except those specifically regulating insurance, and (2) ERISA expressly limits remedies in an action to recover benefits to contract damages and, in the court's discretion, reasonable attorneys fees. 29 USC §1132(a), (g). Without the incentives of consequential damages, emotional distress damages, and punitive damages, plaintiffs attorneys were unwilling to pursue a suit against an HMO, no matter how outrageous the conduct.
Persons clearly exempt from ERISA, and always free to sue their HMOs for tortious conduct with respect to benefit claims, include government employees and public agency employees (29 USC §1003(b)(1)); church employees or employees of church-operated businesses (29 USC §1003(b)(2)); independent contractors who are "participants" in a plan (29 USC §1003(b)(3)); self-employed individuals, as long as the plan does not cover their employees (In re Watson (9th Cir 1998) 161 F3d 593); and individuals whose plan falls within the Department of Labor's "safe harbor provisions" for certain kinds of group insurance (29 CFR 2510.3-1(j); see Stuart v UNUM Life Ins. Co. (9th Cir 2000) 217 F3d 1145, 1149).
Independent Review
The new Accountability Act provides for an independent review of unresolved complaints against health plans or health insurers, which must be completed before suit may be brought. CC §3428(k)(1). The state Department of Managed Care (DMC) will facilitate reviews by a neutral review board, rather than a review by HMO personnel. The final determination of these reviews is adopted by the DMC. When the independent review system rules in favor of the patient, the HMO must offer the patient the disputed health care services and reimburse the patient for emergency or urgent care received. Health & S C §§1374.30 et seq., 1374.34.
The review procedure requires patients to apply for independent review within six months of the denial or receipt of services. Health & S C §1374.30(k). The review process can be expedited. Health & S C §1374.31. And the DMC review remedies need not be exhausted before a lawsuit can be filed if substantial harm either has occurred or will imminently occur before the review process is completed. CC §3428(k)(2), (a)(1).
The DMC also has created an office of Patient Advocates, which can assist patients in securing health care services. See Health & S C §§444.20(b), 1368.02(c). In addition, the DMC has replaced the Department of Corporations in its role of regulating HMOs.
Liability Checklist
As a threshold matter, the Accountability Act applies only to services provided, or denied, on or after January 1, 2001. CC §3428(a).
A patient must show that the HMO breached its duty of ordinary care in arranging or providing patient health care services that have been deemed medically necessary. These services, however, must be services that are provided as a benefit under the particular HMO plan. CC §3428(a). The HMO's failure to exercise ordinary care must have resulted in a denial, delay, or modification in the services recommended or provided to the patient. In addition, the patient must have suffered substantial harm, which is defined as loss of life; loss or significant impairment of limb or bodily function; significant disfigurement; severe and chronic physical pain; or "significant financial loss." CC §3428(a)(1). Liability cannot be maintained against an HMO unless the services in question were actually recommended by a health care practitioner (CC §3428(a)(1)) and the independent review process has been exhausted or is inapplicable (CC §3428(k)).
Once liability is established, damages, including punitive damages, may be recovered. HMO liability does not, however, include liability based on medical malpractice by a doctor or hospital. CC §3428(e). The act also prohibits an HMO from seeking indemnity from a treating physician or other health care provider. CC §3428(d).
Evidence Checklist
First, try to obtain the HMO's medical policies and standards, including evidence of how these were created, what criteria were used to create them, and how they are used. Comparing these to the materials received by the patient may show that standards used to evaluate coverage differ from those represented to the patient. Policy and administrative procedure plans may also help determine how certain coverage decisions were made.
Second, obtain any promotional materials offered to the public and any benefit materials provided to the patient. These materials will be useful, especially when compared to the coverage actually provided or compared to the policies and standards.
Third, contracts between the HMO and medical service providers will indicate the type and means of agency of the doctors and health care providers. This includes contracts of medical directors and reviewers, including performance standards and incentives, as well as decision-making guidelines.
Fourth, the HMO's authorization process, as outlined in both public and internal documents, will help counsel analyze the basis for authorization or denial, the qualifications of the individuals directly responsible for authorizing or denying care, and quality and cost management within the HMO.
Finally, complaints filed by members, including surveys and telephone logs, can prove invaluable in determining the quality of care patients believe they are receiving.
ERISA Concerns
Because of ERISA preemption, tort claims otherwise available under state law are generally not available against a provider of health insurance if the insurance is part of an employee benefit plan regulated by ERISA. Pilot Life Ins. Co., 481 US 41 (disallowing state common law claim of bad faith). However, an insured may potentially recover from an HMO under a state law that specifically "regulates insurance," because, although ERISA preempts state laws regulating employee benefit plans (29 USC §1144(b)(2)(B)), it does not apply to laws that "regulate insurance" (29 USC §1144(b)(2)(A), the "saving clause"). Furthermore, the federal McCarran-Ferguson Act expresses Congress's intent that insurance regulation is a matter for the states unless Congress expressly says otherwise. 15 USC §1011. Federal laws not specifically relating to insurance can be applied to state regulation of insurance only if they do not "invalidate, impair or supersede" the state law. 15 USC §1012(b).
The saving clause has not been predictably applied. For example, California's common law "notice/prejudice" rule, under which an insurer may not reject an untimely claim unless it can show that it was prejudiced by the untimeliness, was held not preempted by ERISA. The U.S. Supreme Court noted that the state rule only allowed a longer period to file than the minimum required by federal law and was thus complementary to the federal scheme. UNUM Life Ins. Co. v Ward (1999) 526 US 358, 377. At the same time, however, another common law rule-that the policyholding employer is deemed to be the agent of the insurer-was held to be preempted by ERISA. 526 US at 378-379. These results are consistent with the recently explained doctrine that the saving clause does not always prevent application of ERISA, which leaves room for complementary or dual federal and state regulation but calls for federal supremacy when the two regimes cannot be harmonized. John Hancock Mut. Life Ins. Co. v Harris Trust & Sav. Bank (1993) 510 US 86, 98; Kayes v Pacific Lumber Co. (9th Cir 1995) 51 F3d 1449, 1456-1457.
Thus, insurers may continue to try to use ERISA as a shield to avoid tort liability. There are several arguments as to why ERISA might preempt the Accountability Act. First, the extent of ERISA preemption is not dictated by state law. In other words, state laws that purport to regulate insurance by "deeming" a plan to be an insurance company are outside the saving clause and remain subject to preemption. 29 USC §1144(b)(2)(B); UNUM v Ward, 526 US at 367 n2. Thus it may be irrelevant that the California Legislature specifically declared that health care service plans and other managed care entities are "engaged in the business of insurance" as that term is defined by the McCarran-Ferguson Act (SB 21, Stats 1999, c 536).
Moreover, ERISA has preempted California laws in the past. For instance, in Hewlett-Packard Co. v Barnes (9th Cir 1978) 571 F2d 502, ERISA was held to preempt a California health care statute that sought to regulate employee benefit plans. The Ninth Circuit said that, for purposes of analysis under the McCarran-Ferguson Act, ERISA is a specific act of Congress relating to the business of insurance. 571 F2d at 504. And the Ninth Circuit has held that ERISA preempts a state statute giving a private right of action for bad faith delay in insurance payments. Kanne v Connecticut Gen. Life Ins. Co. (1988) 867 F2d 489. There is also California case law that differentiates health care service plans from insurance. See Williams v California Physicians' Service (1999) 72 C4th 722; Reynolds v California Dental Service (1988) 200 CA3d 590. Finally, managed health care plans are specifically exempted from the California Insurance Code (Ins C §740(g)), a fact not conducive to a claim that HMOs are actually insurance providers.
However, there is also reason to believe that ERISA will no longer be an obstacle to a patient's claim for an HMO's wrongdoing. First is a comparison with the Texas Health Care Liability Act, enacted in 1997. The similarities between the right-to-sue laws of California and Texas make a strong argument that ERISA will not preempt the Accountability Act. Since the Texas law came into effect, several lawsuits have been filed by Texas patients against their HMOs, and only the "independent review" portion of the Texas law has been found to be preempted by ERISA. Montemayor v Corp. Health Ins. Inc. (5th Cir 2000) 215 F3d 526, cert filed 121 S Ct 753, No. 00-665. Furthermore, the Seventh Circuit has upheld the "independent review" portion of a similar law. Moran v Rush Prudential HMO, Inc. (2000) 230 F3d 959, cert gr 6/29/01.
Second, under the saving clause, ERISA does not apply to state laws regulating the business of insurance. Therefore, if courts agree with the California Legislature that HMOs are in the business of insurance, there would be no ERISA preemption of the Accountability Act. It should be noted that the California Supreme Court has on occasion treated the distinction between a health care service plan and an insurer as "immaterial." See Sarchett v Blue Shield (1987) 43 C3d 1, 3 n1. The Accountability Act's survival may be determined through the application of the Metropolitan Life test to determine whether the act "regulates insurance" and therefore falls under the protection of the McCarran-Ferguson Act. Under the Metropolitan Life three-factor balancing test, the court must determine: (1) whether the regulation has the effect of transferring or spreading a policyholder's risk, (2) whether the regulation is an integral part of the policy relationship between the insurer and insured, and (3) whether the regulation is limited to entities within the insurance industry. Metropolitan Life Ins. Co v Massachusetts (1985) 471 US 724, 743. These are relevant considerations to be weighed, but none are required or determinative. UNUM v Ward, 526 US at 573. Alternatively, the Accountability Act arguably provides a state law remedy that is "complementary" to the ERISA scheme. And if federal legislation expands patient rights to sue HMOs, then arguably Congress does not intend ERISA to preempt such rights, even under state statutes.
Finally, the Third Circuit has made a distinction between lawsuits based on the quality of HMO care and lawsuits based on the quantity of care, finding that ERISA bars suits based on denial-of-treatment decisions but not suits based on quality-of-care decisions. See In re U.S. Healthcare Inc. (1999) 193 F3d 151; Dukes v U.S. Healthcare Inc. (1995) 57 F3d 350 (claim for medical negligence fell outside ERISA). This provides some authority that the Accountability Act should not be preempted for creating a right to sue based on the quality of HMO services. On a somewhat parallel track, the state Supreme Court recently stated that the federal Medicare Act "left open a wide field of operation for state law pertaining to standards for the practice of medicine and the manner in which medical services are delivered." McCall v Pacificare of California, Inc. (2001) 25 C4th 412,423.
As with all new legislation, it remains to be seen how the courts will interpret the key phrases of this act. In any event, plaintiffs attorneys should begin to familiarize themselves with the Accountability Act, as it may become a powerful weapon to protect consumers from HMOs.
Brian S. Kabateck is a partner, and Erin K. Moore an associate, at Quisenberry & kabateck in Los Angeles. Kabateck specializes in plaintiffs insurance litigation.
By Brian S. Kabateck and Erin K. Moore
Edited by Peg Healy
Category: Insurance
Suppose your client has a rare form of cancer and wants to undergo promising treatments at a reputable research hospital. But the client's health insurance plan denies coverage for "experimental" treatment, even though the cancer is so rare that there are too few cases to create a clinically valid sample. Can you sue the plan for wrongful denial of benefits? Although there is no simple answer, the legal landscape has recently improved for your client.
Federal law that regulates health plans obtained through private employers has traditionally preempted suits in state court for wrongful denial of treatment. This preemption has affected an estimated 70 percent of all health care plan enrollees in California. In contrast, suits against health plans obtained through public employers are not preempted: Such plans have been found liable for millions of dollars for wrongful denial of treatment, including punitive damages. See, for example, Fox v Health Net (Riverside County Superior Court) Civ No. 219692 (December 1993); Goodrich v Aetna Life & Cas. Co., Inc. (San Bernardino County Superior Court) Civ No. RCV020499 (January 1999).
In 1999 the California Legislature enacted the Managed Healthcare Insurance Accountability Act (CC §3428) to correct this inequity and to expand tort recovery for patients who are unreasonably denied treatment after 2000. Under the act, health care service plans and managed care entities may be held "liable for any and all harm legally caused by [the] failure to exercise ordinary care" in arranging for the provision of medically necessary health care services. The act permits all state law remedies (CC §3428(h)), including tort and bad faith damages. A bill pending at press time (SB 458, Escutia D-Montebello) is expected to clarify that this remedy is available in a court of law, regardless of mandatory arbitration clauses.
The ERISA Hurdle
Prior to the Accountability Act, the federal Employee Retirement Income Security Act of 1974 (ERISA, 29 USC §§100 et seq.) prevented most patients from suing their HMOs in state court for unreasonable denial or delay of treatment approval by preempting state law claims as to private employee benefit plans (29 USC §1144). ERISA was enacted as a means to curb abuses of company and union pension plans. However, ERISA has been broadly applied to cover health care benefit plans. 29 USC §1002(1) (definition); Pilot Life Ins. Co. v Dedeaux (1987) 481 US 41 (long-term disability employee benefit plan).
ERISA has had the unintended effect of preventing patients from bringing meritorious lawsuits relating to most benefit plans in state court for two reasons: (1) ERISA preempts all state laws, including statutory and common law tort remedies, except those specifically regulating insurance, and (2) ERISA expressly limits remedies in an action to recover benefits to contract damages and, in the court's discretion, reasonable attorneys fees. 29 USC §1132(a), (g). Without the incentives of consequential damages, emotional distress damages, and punitive damages, plaintiffs attorneys were unwilling to pursue a suit against an HMO, no matter how outrageous the conduct.
Persons clearly exempt from ERISA, and always free to sue their HMOs for tortious conduct with respect to benefit claims, include government employees and public agency employees (29 USC §1003(b)(1)); church employees or employees of church-operated businesses (29 USC §1003(b)(2)); independent contractors who are "participants" in a plan (29 USC §1003(b)(3)); self-employed individuals, as long as the plan does not cover their employees (In re Watson (9th Cir 1998) 161 F3d 593); and individuals whose plan falls within the Department of Labor's "safe harbor provisions" for certain kinds of group insurance (29 CFR 2510.3-1(j); see Stuart v UNUM Life Ins. Co. (9th Cir 2000) 217 F3d 1145, 1149).
Independent Review
The new Accountability Act provides for an independent review of unresolved complaints against health plans or health insurers, which must be completed before suit may be brought. CC §3428(k)(1). The state Department of Managed Care (DMC) will facilitate reviews by a neutral review board, rather than a review by HMO personnel. The final determination of these reviews is adopted by the DMC. When the independent review system rules in favor of the patient, the HMO must offer the patient the disputed health care services and reimburse the patient for emergency or urgent care received. Health & S C §§1374.30 et seq., 1374.34.
The review procedure requires patients to apply for independent review within six months of the denial or receipt of services. Health & S C §1374.30(k). The review process can be expedited. Health & S C §1374.31. And the DMC review remedies need not be exhausted before a lawsuit can be filed if substantial harm either has occurred or will imminently occur before the review process is completed. CC §3428(k)(2), (a)(1).
The DMC also has created an office of Patient Advocates, which can assist patients in securing health care services. See Health & S C §§444.20(b), 1368.02(c). In addition, the DMC has replaced the Department of Corporations in its role of regulating HMOs.
Liability Checklist
As a threshold matter, the Accountability Act applies only to services provided, or denied, on or after January 1, 2001. CC §3428(a).
A patient must show that the HMO breached its duty of ordinary care in arranging or providing patient health care services that have been deemed medically necessary. These services, however, must be services that are provided as a benefit under the particular HMO plan. CC §3428(a). The HMO's failure to exercise ordinary care must have resulted in a denial, delay, or modification in the services recommended or provided to the patient. In addition, the patient must have suffered substantial harm, which is defined as loss of life; loss or significant impairment of limb or bodily function; significant disfigurement; severe and chronic physical pain; or "significant financial loss." CC §3428(a)(1). Liability cannot be maintained against an HMO unless the services in question were actually recommended by a health care practitioner (CC §3428(a)(1)) and the independent review process has been exhausted or is inapplicable (CC §3428(k)).
Once liability is established, damages, including punitive damages, may be recovered. HMO liability does not, however, include liability based on medical malpractice by a doctor or hospital. CC §3428(e). The act also prohibits an HMO from seeking indemnity from a treating physician or other health care provider. CC §3428(d).
Evidence Checklist
First, try to obtain the HMO's medical policies and standards, including evidence of how these were created, what criteria were used to create them, and how they are used. Comparing these to the materials received by the patient may show that standards used to evaluate coverage differ from those represented to the patient. Policy and administrative procedure plans may also help determine how certain coverage decisions were made.
Second, obtain any promotional materials offered to the public and any benefit materials provided to the patient. These materials will be useful, especially when compared to the coverage actually provided or compared to the policies and standards.
Third, contracts between the HMO and medical service providers will indicate the type and means of agency of the doctors and health care providers. This includes contracts of medical directors and reviewers, including performance standards and incentives, as well as decision-making guidelines.
Fourth, the HMO's authorization process, as outlined in both public and internal documents, will help counsel analyze the basis for authorization or denial, the qualifications of the individuals directly responsible for authorizing or denying care, and quality and cost management within the HMO.
Finally, complaints filed by members, including surveys and telephone logs, can prove invaluable in determining the quality of care patients believe they are receiving.
ERISA Concerns
Because of ERISA preemption, tort claims otherwise available under state law are generally not available against a provider of health insurance if the insurance is part of an employee benefit plan regulated by ERISA. Pilot Life Ins. Co., 481 US 41 (disallowing state common law claim of bad faith). However, an insured may potentially recover from an HMO under a state law that specifically "regulates insurance," because, although ERISA preempts state laws regulating employee benefit plans (29 USC §1144(b)(2)(B)), it does not apply to laws that "regulate insurance" (29 USC §1144(b)(2)(A), the "saving clause"). Furthermore, the federal McCarran-Ferguson Act expresses Congress's intent that insurance regulation is a matter for the states unless Congress expressly says otherwise. 15 USC §1011. Federal laws not specifically relating to insurance can be applied to state regulation of insurance only if they do not "invalidate, impair or supersede" the state law. 15 USC §1012(b).
The saving clause has not been predictably applied. For example, California's common law "notice/prejudice" rule, under which an insurer may not reject an untimely claim unless it can show that it was prejudiced by the untimeliness, was held not preempted by ERISA. The U.S. Supreme Court noted that the state rule only allowed a longer period to file than the minimum required by federal law and was thus complementary to the federal scheme. UNUM Life Ins. Co. v Ward (1999) 526 US 358, 377. At the same time, however, another common law rule-that the policyholding employer is deemed to be the agent of the insurer-was held to be preempted by ERISA. 526 US at 378-379. These results are consistent with the recently explained doctrine that the saving clause does not always prevent application of ERISA, which leaves room for complementary or dual federal and state regulation but calls for federal supremacy when the two regimes cannot be harmonized. John Hancock Mut. Life Ins. Co. v Harris Trust & Sav. Bank (1993) 510 US 86, 98; Kayes v Pacific Lumber Co. (9th Cir 1995) 51 F3d 1449, 1456-1457.
Thus, insurers may continue to try to use ERISA as a shield to avoid tort liability. There are several arguments as to why ERISA might preempt the Accountability Act. First, the extent of ERISA preemption is not dictated by state law. In other words, state laws that purport to regulate insurance by "deeming" a plan to be an insurance company are outside the saving clause and remain subject to preemption. 29 USC §1144(b)(2)(B); UNUM v Ward, 526 US at 367 n2. Thus it may be irrelevant that the California Legislature specifically declared that health care service plans and other managed care entities are "engaged in the business of insurance" as that term is defined by the McCarran-Ferguson Act (SB 21, Stats 1999, c 536).
Moreover, ERISA has preempted California laws in the past. For instance, in Hewlett-Packard Co. v Barnes (9th Cir 1978) 571 F2d 502, ERISA was held to preempt a California health care statute that sought to regulate employee benefit plans. The Ninth Circuit said that, for purposes of analysis under the McCarran-Ferguson Act, ERISA is a specific act of Congress relating to the business of insurance. 571 F2d at 504. And the Ninth Circuit has held that ERISA preempts a state statute giving a private right of action for bad faith delay in insurance payments. Kanne v Connecticut Gen. Life Ins. Co. (1988) 867 F2d 489. There is also California case law that differentiates health care service plans from insurance. See Williams v California Physicians' Service (1999) 72 C4th 722; Reynolds v California Dental Service (1988) 200 CA3d 590. Finally, managed health care plans are specifically exempted from the California Insurance Code (Ins C §740(g)), a fact not conducive to a claim that HMOs are actually insurance providers.
However, there is also reason to believe that ERISA will no longer be an obstacle to a patient's claim for an HMO's wrongdoing. First is a comparison with the Texas Health Care Liability Act, enacted in 1997. The similarities between the right-to-sue laws of California and Texas make a strong argument that ERISA will not preempt the Accountability Act. Since the Texas law came into effect, several lawsuits have been filed by Texas patients against their HMOs, and only the "independent review" portion of the Texas law has been found to be preempted by ERISA. Montemayor v Corp. Health Ins. Inc. (5th Cir 2000) 215 F3d 526, cert filed 121 S Ct 753, No. 00-665. Furthermore, the Seventh Circuit has upheld the "independent review" portion of a similar law. Moran v Rush Prudential HMO, Inc. (2000) 230 F3d 959, cert gr 6/29/01.
Second, under the saving clause, ERISA does not apply to state laws regulating the business of insurance. Therefore, if courts agree with the California Legislature that HMOs are in the business of insurance, there would be no ERISA preemption of the Accountability Act. It should be noted that the California Supreme Court has on occasion treated the distinction between a health care service plan and an insurer as "immaterial." See Sarchett v Blue Shield (1987) 43 C3d 1, 3 n1. The Accountability Act's survival may be determined through the application of the Metropolitan Life test to determine whether the act "regulates insurance" and therefore falls under the protection of the McCarran-Ferguson Act. Under the Metropolitan Life three-factor balancing test, the court must determine: (1) whether the regulation has the effect of transferring or spreading a policyholder's risk, (2) whether the regulation is an integral part of the policy relationship between the insurer and insured, and (3) whether the regulation is limited to entities within the insurance industry. Metropolitan Life Ins. Co v Massachusetts (1985) 471 US 724, 743. These are relevant considerations to be weighed, but none are required or determinative. UNUM v Ward, 526 US at 573. Alternatively, the Accountability Act arguably provides a state law remedy that is "complementary" to the ERISA scheme. And if federal legislation expands patient rights to sue HMOs, then arguably Congress does not intend ERISA to preempt such rights, even under state statutes.
Finally, the Third Circuit has made a distinction between lawsuits based on the quality of HMO care and lawsuits based on the quantity of care, finding that ERISA bars suits based on denial-of-treatment decisions but not suits based on quality-of-care decisions. See In re U.S. Healthcare Inc. (1999) 193 F3d 151; Dukes v U.S. Healthcare Inc. (1995) 57 F3d 350 (claim for medical negligence fell outside ERISA). This provides some authority that the Accountability Act should not be preempted for creating a right to sue based on the quality of HMO services. On a somewhat parallel track, the state Supreme Court recently stated that the federal Medicare Act "left open a wide field of operation for state law pertaining to standards for the practice of medicine and the manner in which medical services are delivered." McCall v Pacificare of California, Inc. (2001) 25 C4th 412,423.
As with all new legislation, it remains to be seen how the courts will interpret the key phrases of this act. In any event, plaintiffs attorneys should begin to familiarize themselves with the Accountability Act, as it may become a powerful weapon to protect consumers from HMOs.
Brian S. Kabateck is a partner, and Erin K. Moore an associate, at Quisenberry & kabateck in Los Angeles. Kabateck specializes in plaintiffs insurance litigation.
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