While patient protection legislation remains stalled in Congress, the U.S. Supreme Court last week began hearing a case on whether states can require health plans to accept a second, outside opinion when there is a dispute with a patient over paying for care.
Forty states and the District of Columbia now require such outside reviews, which patients' rights advocates consider an important protection in an age of managed care. The legal question, however, is whether these state laws are pre-empted by the Employee Retirement Income Security Act, or ERISA, a 1974 federal law that regulates employee benefit plans and is less amenable to patients seeking to overturn HMO decisions.
The court's ruling, which is expected by July, could have far-reaching consequences affecting tens of millions of workers enrolled in HMOs. It could also prod Congress to pass a long-debated, national patients' bill of rights.
Although both the House and the Senate last year passed patients' rights bills that included a provision for independent review, lawmakers could not resolve differences over other issues. A federal law would override the Supreme Court's decision and apply nationwide, regardless of state laws.
The case underscores the growing tension between health plans worried about the rising cost of healthcare and patients who don't want insurance administrators making their medical decisions.
Patient advocates were dealt a blow in a separate case last week when a lower court judge in Sacramento, Calif., barred the state's Department of Managed Health Care from requiring Blue Shield of California to pay for a weight-loss drug not covered under a patient's contract. The agency had fined Blue Shield $270,000 after the insurer refused to pay for Xenical even after an independent panel of doctors determined that the diet drug was medically necessary in the treatment of an obese patient.
Several Supreme Court justices last week seemed hesitant to force HMOs to abide by the decision of outside reviewers.
The case centers on an Illinois woman, Debra Moran, who asked for an independent review in a dispute with her insurance company, Rush Prudential HMO, over a denial of care. In 1998, a Virginia surgeon had diagnosed Moran with thoracic outlet syndrome, a compression of nerves in the neck, and her primary-care physician recommended surgery performed by a doctor outside the health plan's network.
Rush wouldn't cover the $98,000 operation and offered a different treatment performed by a specialist within the health plan's network. Moran demanded a review of the decision; an outside medical expert agreed that the surgery was medically necessary.
However, Rush still refused to cover the surgery cost, arguing that its benefit offerings were protected by ERISA. Moran paid for the surgery and sued the health plan for the cost under the Illinois HMO Act, which since 1987 has required outside review any time a patient's physician and HMO disagree about what is medically necessary.
A federal court ruled in favor of Rush, but the 7th U.S. Circuit Court of Appeals in Chicago overturned the decision in October 2000, ruling that the health plan "agreed to state insurance regulators and therefore had to abide by the HMO Act."
In March 2000, Thousand Oaks, Calif.-based WellPoint Health Networks bought Rush and decided to appeal the case to the Supreme Court. Meanwhile, the 5th Circuit Court of Appeals in Texas ruled in favor of a health plan in a similar case, which prompted the Supreme Court to accept the Illinois case.
"All Debra Moran has ever sought in this case was the benefit she's entitled to... which saved her right arm," Moran's attorney, Daniel Albers, told the justices last week.
But Justice Antonin Scalia immediately jumped in, framing the issue at the heart of the case: "The question is, who is to decide if she got what she was supposed to get?"
Arguments focused largely on the complex relationship between federal laws, state laws and previous Supreme Court decisions. ERISA says that it "shall supersede any and all state laws" that "relate to any employee benefit plan." At the same time it exempts from that general rule any state law that "regulates insurance."
A focus of early debates was whether a state law requiring an independent review was a valid regulation of health insurance or a pre-empted effort to regulate an employee benefit.
Rush's attorney, John Roberts Jr., said the Illinois law was not a regulation of insurance, but a state-mandated remedy for a medical-coverage dispute that "changes dramatically what the plan actually provides."
Albers argued that the Illinois law was an aspect of insurance regulation that did not conflict with ERISA. Thirty-two states and the American Medical Association filed friends-of-the-court briefs in support of Illinois.
The American Association of Health Plans, which supports Rush, said it is not against independent reviews per se but argues that there should be a national standard. Complying with different state rules would divert employers' resources and drive up costs, it said.