June 1998 Bulletin

Ruling expected soon on Texas HMO liability

State says ERISA does not preempt new law

A federal judge in the U.S. District Court in Houston, Texas is expected to issue a ruling soon on Aetna Health Plans of Texas' suit challenging a new Texas law (SB 386) that allows patients enrolled in managed care plans to make health maintenance organizations (HMOs) liable for certain health care treatment decisions. The law identifies liability as the "proximate harm caused by health care treatment decisions by a [company's] employees, agents and representatives."

In 1997, Texas became the first state in this nation to enact such a law, with Missouri soon following. In both states, language is included that prohibits managed care plans from exercising Employee Retirement Income Security Act (ERISA) standards as a means of defense against a law suit.

In federal court last month, Aetna, which brought suit against the state shortly after the bill was approved, sought a motion for summary judgement and the state's motion for dismissal. Aetna contends that the new law is preempted by the ERISA. Also, Aetna alleges that the law is preempted by the Federal Employees Health Benefit Act which deals with the provision of uniform health benefits to government employees. The state argued that the practice of medicine is in a traditional area of state regulations and ERISA does not mention quality of care issues, therefore, ERISA does not preempt the new law.

But before those arguments could be heard, Judge Vanessa D. Gilmore converted the state's motion to dismiss to a summary judgement. An opinion is expected soon. If it is not in the state's favor, the case could be appealed to the Supreme Court for a definitive ruling on ERISA. A favorable ruling would impact the whole country.

"We hope that the law is upheld," said Sen. David Sibley (R-Waco) who, along with Rep. John Smithee (R-Amarillo), sponsored the bill which was backed by an alliance of doctors and trial attorneys.

The new law states that before a patient can bring a lawsuit against an HMO, an appeal must be made to an independent medical reviewer selected by the Texas Department of Insurance, which will determine if the HMO should have paid for the requested treatment. The law also permits a cause of action for negligent medical care of denial of treatment decisions made by any HMO or insurance companies. In life-threatening situation, the reviewer must make a decision within 48-hours.

"We are pleased to present our position in front of the court," said Kelli Brady, Aetna US healthcare spokesperson.

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