A federal appellate court last week upheld a Texas law that lets patients sue managed-care plans for malpractice, but it struck down the state's independent review process for patient disputes with insurers.
The 1997 Texas law was the first in the country to allow consumers to sue their managed-care plans for malpractice. It was challenged in a lawsuit filed by subsidiaries of Aetna U.S. Healthcare, which contended that the law conflicts with the federal Employee Retirement Income Security Act of 1974.
The 5th U.S. Circuit Court of Appeals in New Orleans upheld a lower-court ruling that said an HMO's liability for malpractice isn't pre-empted by the federal law, but ruled the federal law precludes the state from mandating independent reviews.
Both Aetna and Texas Attorney General John Cornyn, who defended the state law, applauded the decision. Aetna praised it for limiting the scope of consumer legal actions against health plans, while Cornyn's office said it "reaffirms the state's ability to regulate HMOs."
As of late last week, neither side had announced an intent to appeal.
The Texas Medical Association hailed the decision as a "very positive step toward protecting patients' rights," but said it highlights the need for Congress to enact national patient protection standards, including independent reviews of health plan decisions that delay or deny care.
The court upheld the state's authority to stop HMOs from penalizing doctors who advocate medically necessary treatment, Cornyn's office said. It also said patients can sue plans for offering financial incentives to physicians to limit care or having bad doctors in its network, and state medical boards can sue a plan's medical director for malpractice.
Lisa McGiffert, senior policy analyst at Consumers Union's southwest regional office in Austin, Texas, called the decision a mixed bag. "It was positive for consumers for the court to say they have a right to sue an HMO (for medical decisions). But on the downside it takes away a guaranteed right (to independent review)," she said.
McGiffert added that which decisions are medical rather than administrative is "still a bit fuzzy. . . . There certainly is going to be some fine-tuning in the courts through (other) cases."
About 950 cases have been reviewed since the independent review process was launched in November 1997, and patients have prevailed in about half the cases, according to the Texas Department of Insurance.
Cornyn said his office would seek "specific commitments" from HMOs in the state to continue to use the independent review process.