Healthcare industry reaction was divided on the impact of last week's U.S. Supreme Court ruling that a state can force insurers to submit to the decisions of an outside review panel.
In a 5-4 vote, the court upheld a 7th U.S. Circuit Court ruling that the federal Employee Retirement Income Security Act of 1974 does not pre-empt Illinois' HMO Act. The decision is a blow to the insurance industry, which has been fighting the patchwork of state-governed external reviews. At least 40 states and the District of Columbia regulate HMOs.
ERISA generally supersedes state law with the exception of laws governing insurance, banking and securities, exempted under a "saving clause." In the Illinois case, involving a patient enrolled in Rush-Prudential HMO, now called Unicare Health Plans of Illinois, insurers argued unsuccessfully that because an HMO is a healthcare organization, it falls under federal law.
"(A)n HMO is both: It provides healthcare, and it does so as an insurer," said Justice David Souter, writing for the majority.
Souter added that "as long as providing insurance fairly accounts for the application of state law, the saving clause may apply."
In the minority opinion, Justice Clarence Thomas wrote that the ruling "undermines the ability of HMOs to control costs, which, in turn, undermines the ability of employers to provide healthcare coverage for employees."
Health plans were mixed on the ruling's effect. A Blue Cross and Blue Shield Association spokesman called it a "state-by-state situation."
Many insurers would prefer a national standard for external review. "The great danger is that with costs already skyrocketing, employers navigating varying state laws may be forced to reconsider whether they will offer health insurance for their employees," said Donald Young, M.D., president of the Washington-based Health Insurance Association of America.
Some consumer groups also favor a federal standard, but would prefer it as part of a patients' bill of rights, said Sara Rosenbaum, a professor of law and policy at George Washington University School of Public Health. The ruling has "limited meaning," she said. "There are many states whose legal structure may not look like the one in Illinois."
Dan Sisto, the president of the Healthcare Association of New York State, called the decision good news. "As each year goes by, without action from Congress, the necessity for states to protect patients and providers becomes more compelling," he said.