Taking Care of Business

Senate Fails to Close Loopholes Protecting Insurers

In 1996, Alan Shapiro had a brain tumor. His doctors at Memorial Sloan-Kettering advised aggressive, emergency therapy for the 44-year-old, but Empire Blue Cross and Blue Shield refused to cover the therapy on the grounds that it was experimental. A court even ordered the company to pay for the treatment, but Shapiro died so soon after that decision, he never had a chance to try it. Whether the company's decision was sound or not, Shapiro's survivors were not able to sue the managed care company for medical malpractice or wrongful death, barred by quirky provisions in both federal and state law.

If the Democrats had won the fight over the Patients' Bill of Rights in the Senate last week, people in the Shapiros' situation might finally have had some luck when it comes to suing their HMOs. Republicans voted down the expansion of the right to sue, along with initiatives that would have given women more freedom to pick their doctors and, under some circumstances, guaranteed patients the right to keep their doctor for a few months after switching plans. But the liability issue, due to resurface when the debate moves to the House, remains the debate's hot spot because it cuts to the heart of the health care mess: money.

Managed health care companies now decide what kinds of tests and appointments most Americans get, who their doctors are, and, often, which therapies will give them a last shot at life. Yet "health care consumers," as we're lovingly known, can't sue most HMOs for damages when they feel these decisions are harmful. The strange loophole is the result of applying a 1970s federal law designed to protect employers to today's insurers, who have fused actual medicine into their insurance business.

Illustration: Jordin Isip

The federal law, called the Employee Retirement Income Security Act, or ERISA, protects private employer-sponsored health insurers in suits over anything but the cost of care. And New York State law further shields managed care companies from liability by simply stating that "health services provided through HMOs either directly or indirectly are not to be considered the practice of the profession of medicine."

If Congress ultimately adopts a right-to-sue provision— an unlikely prospect, given Republican unity against it and the $20 million industry-sponsored ad campaign supporting their position— ERISA would no longer apply to health insurance. The state protections might also become moot.

What difference would that make? Republicans insist that opening the door to lawsuits would "make trial lawyers rich by drowning the courts with new lawsuits," as one industry ad now running on TV puts it. Opponents of the right to sue also predict it would drive up the cost of health care and cause employers to stop providing health insurance altogether.

But those favoring a right to sue say that the threat of litigation would make HMOs more honest. "Health plans would know they're accountable and do the right thing from the beginning," predicts Judy Waxman of Families USA, a nonprofit that advocates for health care consumers. Patients' advocates also note that few Texans have taken advantage of their unusual state law, which allows lawsuits against HMOs (and was passed in 1997 against the wishes of Governor George W. Bush).

Instead, they see providing a consumer with the right to sue for damages as bringing health insurers in step with the rest of the country. "This is the only industry that has such exemptions," says Waxman, who complains that, as the law now stands, "HMOs have every reason to delay and delay and deny and deny."

Even if very few cases make it to court, there is no question that removing the protections that insulate the health-insurance industry from lawsuits would benefit some real people who have become entangled in the worst of the system. In New York, most complaints never get to court, since patients know their chances of winning are slim. Here are a few cases that were filed, but ultimately thwarted by ERISA and state law.

Patrick Thrope: Thrope was 12 years old when he was diagnosed with heart disease. Just over three years later, Thrope developed serious complications from his condition, but his HMO, the Health Insurance Plan of Greater New York, refused to authorize tests on his heart for two years, according to a 1996 lawsuit filed by his family in New York Supreme Court. Several times, the suit alleges, HIP denied the Thropes' request for an ambulance for Patrick, forcing him to rely on a cab to get to the hospital, and delayed authorization when he required hospital treatment.

The gravest of the Thropes' claims accuses HIP of refusing to provide a heart transplant and other surgeries that may have helped their son. The suit also blames HIP for denying the Thropes' request for an out-of-network specialist who was familiar with his case, instead sending the teenager to a HIP network provider who canceled and put off appointments with Thrope for four months. That physician, according to the Thropes' complaint, failed to hospitalize or make a referral for him even after informing the young Thrope that his lungs were filling with blood and that he might not live much longer.

Two days after that visit, Thrope collapsed on the street outside his home and died at age 18. But HIP, having successfully raised both the ERISA statute and New York State public-health law in its defense, was not required to address the Thropes' malpractice charges in court. Instead, the company settled its case by covering $5000 of Thrope's medical expenses, which a lawyer representing HIP says were not at first presented to the company.

HIP spokesperson Loretta Creggett adds that "the case was managed by participating physicians. This was not a case where the HMO intruded on the management of patient care." Cases against Thrope's individual health care providers are still pending.

Michele Swersey: Beginning in 1989, Swersey, a Long Island mother of two, experienced what court papers describe as "throbbing, chronic, and agonizing pelvic pain." Her gynecologist eventually traced it to varicose veins in her pelvis. According to her complaint, Swersey's primary care physician referred her to the Pain Alleviation Center, writing that "without this treatment she would need to be managed with addicting pain medication," and providing Swersey's insurer, Empire Blue Cross/Blue Shield, with documentation for the referral. Swersey's complaint says she called Empire to make sure her pain treatment would be covered. The company covered her claims, but then abruptly stopped. According to the complaint, Empire defended its denial on the grounds that Swersey's pain management was not medically necessary.

Swersey sued to make Empire cover her unpaid medical bills, which come to at least $6550. The case, filed in 1997, is still pending. But, whatever the outcome, Swersey was limited by ERISA. If not for the statute, she could have sued for breach of contract, which could have resulted in her collecting damages. As it is, the amount that she might receive is dwarfed by her legal bills, a phenomenon that discourages many patients who would otherwise sue. Regarding all cases involving Empire, spokesperson Deborah Bohren says, "Our legal obligation is to ensure that we only pay claims that are medically necessary."

David Ockert: In 1989, Ockert, a psychologist, was injured in a car accident that left him in need of physical therapy and help getting around and completing daily tasks. According to his legal complaint, his insurer, Empire Blue Cross and Blue Shield, refused to consistently cover his medical bills. "Sometimes they paid, sometimes they didn't," his attorney, Joseph Slater, told the Voice. Ockert alleges that Empire's carelessness, recklessness, and negligence left him intermittently bedridden.

As a result, the psychologist is suing his HMO for $5 million in damages and another $500,000 on behalf of his wife, who claimed she had lost his companionship. Slater says that Empire's lawyers have raised ERISA as one of their defenses. But the suit, which was filed in 1996, is now on hold pending the Ockerts' separate divorce case.

Research: Joshua Gaynor

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