Supreme Court to settle HMO lawsuit question

WASHINGTON -- The Supreme Court said Monday it will use the case of a Texas woman whose HMO gave her only one day in the hospital to recover from a hysterectomy to clarify when patients can sue health insurers for denying treatment that a doctor recommends.

The facts of Ruby Calad's case go to the heart of many patients' frustration with managed care health plans, which save money by limiting coverage and treatment options.

"That is the quintessential HMO horror story," said George Parker Young, Calad's lawyer. "They gave her one day after major female surgery," even though her doctor objected.

The court also agreed to hear a companion case from Texas involving a post-polio patient required to use a cheaper pain pill than his doctor had recommended. Juan Davila claims he suffered bleeding ulcers and nearly had a heart attack.

Calad, of Sugar Land, and Davila of Denton, ended up in the emergency room, and both later sued over allegedly shoddy treatment.

Patients rights advocates and trial lawyers say HMOs need the threat of lawsuits to ensure they don't shortchange patients. HMOs say lawsuits drive up costs for everyone and they must draw the line somewhere.

Employer-sponsored health insurance covers nearly 160 million employees and their families, as well as 16 million retirees, according to court filings in a related lawsuit. As of 2001, 93 percent of employees with employer-sponsored health plans were enrolled in some kind of managed care.

Some in Congress have pushed for national patients' right legislation that would allow patients to sue over alleged injuries, and HMOs lobbied hard against it. The broadest recent effort faltered two years ago.

So there remains only a web of unwieldy laws and lower court rulings governing where patients can bring their lawsuits and what they can ask for.

The cases before the Supreme Court involve appeals brought by two health insurers who lost a fight in a lower court over whether Calad and Davila could sue for medical malpractice or negligence. Lower courts nationwide have split over whether such suits against HMOs belong in state courts or federal courts.

Patients and their lawyers generally want to make their case in state courts, with the potential for high punitive and compensatory damage awards from juries. Insurers say claims like those brought by Calad and Davila belong in federal court, where the most the patient could recover is the value of the benefit denied by the HMO.

The insurance industry wants the Supreme Court to sort out the confusion, said Susan Pisano, a spokeswoman for the American Association of Health Plans.

"Employers really need, in an era of rising costs and an increasing number of uninsured (patients), to be able to use the tools available to them to promote quality and affordability," Pisano said.

The tools in this instance were decisions by administrators or higher-ups at Aetna Health Inc. and Cigna Healthcare of Texas Inc. to deny treatment that the insurers said was not medically necessary.

The cases address a legal gray area where decisions about treatment and insurance coverage mingle. In most such cases, a doctor affiliated with an HMO recommends one thing but HMO administrators recommend something else.

The Davila and Calad cases are typical of what happens when patients try to sue over such mixed decisions.

In both instances, insurers claimed the original lawsuit belonged in federal court because the claim could have been brought under a 1974 law governing employer benefit and health plans.

Once the suit was moved to federal court, the insurer asked that it be dismissed because it was an improper lawsuit under the 1974 law, the Employee Retirement Income Security Act, or ERISA.

ERISA allows suits to permit a patient to get a particular benefit that the plan has denied, but not patient lawsuits for monetary damages. The law predates the rise of managed care, and lawyers and judges have called for an overhaul.

The cases are Aetna Health Inc. v. Davila, 02-1845, and Cigna Healthcare of Texas Inc. v. Calad, 03-83.