The U.S. Supreme Court last week handed HMOs and other insurers a legal victory in the long-running dispute over denial of coverage for expensive experimental treatments.
The justices without comment let stand lower court rulings blocking a California woman from suing in state court for punitive damages over the death of her son. The lower courts had said that the federal Employee Retirement Income Security Act shields HMOs from such suits.
The case involved Kaiser Foundation Health Plan's refusal to pay for a bone marrow transplant for Ryan Comer of Pleasanton, Calif., who was suffering from cancer. Kaiser said its contract with Comer's employer, AT&T Networks, didn't cover experimental treatments such as bone marrow transplants.
The procedure would have cost more than $100,000.
Comer's mother, Billie J. Comer, filed a wrongful death suit against Oakland, Calif.-based Kaiser in state court in 1992. She argued that Kaiser's denial of coverage delayed the treatment and contributed to her son's death.
ERISA allows a plaintiff covered by a private employer's group health plan to sue only in federal court and only for payments of disputed coverage and for attorney fees and court costs. A plaintiff can't gain punitive damages under the law.
Comer's mother argued that ERISA shouldn't apply in her case because she was not a plan beneficiary but a survivor seeking compensation for a relative's death. She asked for punitive and other damages to be determined at trial.
However, the trial court disagreed and dismissed the suit, an action that was upheld by a federal appeals court and last week by the U.S. Supreme Court.
The Supreme Court's action demonstrates "that the scope of ERISA pre-emption can insulate HMOs from liability for their decisions in connection with medical benefits," said Joseph Aoun, a healthcare lawyer and partner with Honigman, Miller, Schwartz and Cohn in Detroit. He was not involved in the case.
"It's a question mark in everyone's mind whether ERISA was intended to be as broad as it is interpreted today," Aoun said. "HMOs are really enjoying the benefit of a pre-emption that was primarily designed for employers" so they wouldn't have to comply with 50 state mandates in designing benefit plans, he said.
If a plaintiff is covered by a plan offered by a public employer, a case can be tried in state court. In 1993, Woodland Hills-based Health Net lost a judgment of $89.3 million, including $70 million in punitive damages, for denying a breast cancer patient the same treatment sought by Comer for her son.
According to Comer's attorney, Gary L. Tysch of Upland, the Supreme Court ruling is another example of the ERISA pre-emption allowing managed care to become "managed profit." The decision "will encourage (HMOs) to start denying more care," he said.