The managed-care industry won another legal victory earlier this month when a federal judge ruled against the Texas Board of Medical Examiners' attempt to discipline a health plan medical director for a coverage denial.
At issue was whether the regulatory reach of state licensing boards extends to HMO medical directors who make medical decisions under plans regulated by the federal Employee Retirement Income Security Act.
The medical board found that the medical director had engaged in the practice of medicine; but the judge determined that in this case, no medical decision was involved.
U.S. District Judge Barbara Lynn in Dallas found that the benefit denial was a "pure coverage determination" and that the medical director "never diagnosed, treated or offered to treat (the patient)."
Connie Barron, associate director of legislative affairs for the Texas Medical Association, called the decision "a disappointment, only in that we have not answered the question."
The medical association has pressed for broad patient rights to sue health plans over coverage denials.
UnitedHealthcare sued the board March 15 after the board had initiated proceedings against one of the HMO's Texas medical directors, David William Ellis, M.D. The board was responding to a complaint that Ellis violated the Texas Medical Practice Act by inappropriately denying private-duty nursing care for a boy who had been treated for respiratory problems.
Lynn ruled that the board's action is pre-empted by ERISA, which governs self-funded plans. She rejected the state's motion to dismiss the suit.
According to the ruling, the medical director determined that the requested services constituted "custodial care" as defined under the ERISA-governed plan, and that such services were specifically excluded from coverage. The coverage denial was upheld by two internal reviews, but an external review was not conducted because the parents had not consented to release medical records, according to the ruling.
The ruling follows several court decisions limiting the rights of beneficiaries to challenge coverage decisions by ERISA-governed plans.
In June, the U.S. Supreme Court ruled that HMOs can't be sued under federal benefits law for rewarding doctors who limit patient care (July 10, p. 34).
Also, the 5th U.S. Circuit Court of Appeals in New Orleans in June struck down part of a Texas HMO liability law that provided for independent reviews of patient disputes with insurers. The first case filed under that law, which allows malpractice lawsuits against HMOs, was settled for an undisclosed sum by NYLCare in July (Aug. 21, p. 32).
In the UnitedHealthcare case, Lynn ruled that the board's actions violated ERISA by mandating employee benefit structures and establishing an alternative enforcement mechanism to the federal law's claims-review procedures.
UnitedHealthcare, the managed-care arm of Minneapolis-based UnitedHealth Group, is seeking a declaratory judgment that the board's efforts constitute an attempt to regulate an ERISA-governed plan and an injunction to block the board from taking further action against its employees. A final judgment has yet to be entered.
Texas Attorney General John Cornyn's office said it was considering the next procedural steps.
"The court left unanswered the very question we need resolved--whether ERISA pre-empts the regulation of HMO medical directors who make medical decisions," the attorney general's office said in a written statement. It added that the question "may have to be addressed in another case."