High Court Blocks State HMO Medical Negligence Suits

June 21, 2004 (PLANSPONSOR.com) - The nation's high court on Monday blocked an avenue for patients interested in suing their HMO in state court for big damage awards if the HMO wouldn't pay for recommended medical care.

U.S. Supreme Court justices ruled unanimously that two Texas HMO patients can’t file malpractice or negligence cases in a state court venue where trial lawyers and patient rights advocates say plaintiffs are more likely to win big jury awards, the Associated Press reported.

For their part, insurers have argued that plaintiffs are restricted to filing federal court suits where such litigation can only produce awards equal to the amount of the denied HMO benefits.

The justices based their decision on the Employee Retirement Income Security Act (ERISA) which directs that patients like those in the two Texas cases confine their activities to the federal court system. In fact, insurers had argued to the justices, ERISA trumps state patient protection laws or other state statutes that allow medical negligence suits in local courts.

In one of the two cases covered by Monday’s ruling, the court ruled against a hysterectomy patient, Ruby Calad, who had claimed that Cigna Healthcare of Texas essentially evicted her from a Houston hospital after only one day of recovery. The HMO would not pay for a longer stay, even though her doctor recommended it.She was back in the hospital a few days later, suffering complications she claims could have been avoided had she remained hospitalized longer after surgery. She later went to court, seeking to make the HMO pay a price for what she called negligent care, according to court records.

In the Calad case and a companion one involving post-polio patient Juan Davila, insurers tried to pull their lawsuits out of state court and then sought to have the suits thrown out in federal court. Davila took what he claims was inferior but cheaper pain medication, instead of the Vioxx his doctor had recommended, because his Aetna Health plan would not pay for the more expensive drug right away, according to court records. The cheaper medication caused bleeding ulcers, and he almost had a heart attack, Davila said.

Texas and nine other states regulate HMOs, making decisions about whether treatment is medically necessary, state attorneys general backing Calad and Davila argued in a friend of the court brief. Arizona, California, Georgia, Louisiana, Maine, New Jersey, Oklahoma, Washington and West Virginia have laws similar to Texas.

One employer benefits trade group applauded the high court’s move Monday. “It is critical employers feel confident that ordinary benefits decisions will not subject them to the extreme costs associated with often unlimited remedies under many state laws,” said James Klein, president of the American Benefits Council in a statement. “Furthermore, without this decision, employers would have, in effect, lost the ability to design uniform benefit plans covering all of their employees in any state where they may reside, because each state court would have been free to interpret differently a health plan’s terms of coverage. This would lead to unacceptable conflicting results.”

The cases are Aetna Health Inc. v. Davila, 02-1845 and Cigna Healthcare of Texas Inc. v. Calad, 03-83. A copy of the ruling is  here .