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Law limits HMO lawsuits

Patients can sue -- but only sometimes

July 13, 1999
Web posted at: 2:47 p.m. EDT (1847 GMT)

U.S. senators are debating a patient's right to sue an HMO for punitive damages

CNN's Charles Bierbauer talks to a woman with cancer who has sued her HMO
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In this story:

Why you can't sue an HMO for punitive damages

'Punitive damages are definitely in order'

Law written before HMOs became dominant

Alternative solution?


WOODBRIDGE, Virginia (CNN) -- True or false: an HMO can be sued? Actually, both answers are correct, and therein lies one of the issues in the current HMO debate before Congress. It's also why cancer patient Kathy Kight would like to see the current law changed.

A proposal from Democrats would let patients sue health maintenance organizations and collect punitive damages -- often a costlier punishment than actual costs -- when HMOs withhold treatment.

Republicans prefer the status quo, leaving HMO patients with limited legal options if they feel they've been treated poorly.

Changing the law, the GOP argues, would create more federal bureaucracy and force insurers to raise premiums, which would drive up the cost of health care.

Kight blames her HMO, Kaiser Permanente, for not detecting her cancer earlier 

'Punitive damages are definitely in order'

Kight has incurable cancer and blames her HMO for not spotting it.

"I was sent away thinking everything was fine," she told CNN. The 43-year-old Virginia woman, who relies on full Social Security disability payments since leaving her job as an insurance agent, is suing Kaiser Permanente and two of its physicians for malpractice.

She claims they failed to follow up a mammogram with a biopsy to detect possible breast cancer, even though HMO records show one doctor had recommended it.

"The tumor was one centimeter at that point, and I understand that that should have been quite large enough for a biopsy to have been performed and picked up with no problem at all," Kight said.

She eventually had a mastectomy, but the cancer had metastasized to her back and neck. "I think punitive damages are definitely in order," Kight said.

Law written before HMOs became dominant

The cancer patient is within her rights to sue her HMO, but current law limits what she can recover.

Under the 1974 Employee Retirement Income Security Act, known as ERISA, self-insured employers are exempt from state regulations governing health benefits plans.

Why you can't sue an HMO for punitive damages
Under the 1974 Employment Retirement Income Security Act (ERISA), Americans covered by their employer's HMO programs cannot sue their health care provider for punitive damages. Originally designed to shield employee benefit plans from frivolous but potentially crippling lawsuits, ERISA evolved over time to protect HMOs from liability suits by anyone -- except Medicare and Medicaid recipients, church officials and government employees.

It means managed-care providers can be sued for the cost of treatment that was denied but not for punitive damages for an injury or death that occurred because of that denial.

"What that says to an HMO is, well, heck, we'll just delay and delay and deny and deny, because the worst thing that could happen to us is we'll have to pay for the service we originally denied," says Ron Pollack, executive director of Families USA, a health advocacy group that backs the Democratic approach.

The ERISA law was written long before HMOs became a force in health care. The Democrats' proposal to change the law and allow punitive damages alarms health-care providers.

Alternative solution?

"The subtext of the Democratic proposal is: If you have a problem, get a lawyer," says Karen Ignagni, president and CEO of the American Association of Health Plans.

Ignagni says patients' complaints lie more with employers who contract with HMOs to exclude certain coverage.

"The question is: 'Should an individual receive the right to sue because they don't receive what's not covered in the contract?'"

Republicans would create a panel to review claims against HMOs. But Rep. Greg Ganske, R-Iowa, a plastic surgeon, would combine the two plans.

"If a plan doesn't follow that independent panel's recommendation to provide the treatment," Ganske says, "then the plan would be liable, both for compensatory and for punitive damages."

To Kathy Kight, that's what matters.

Correspondent Charles Bierbauer contributed to this report, written by Jim Morris.

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Managed care: A patient's perspective
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Democrats hold up Senate over HMO reform
June 23, 1999

Health Insurance Association of America
The Coalition for Quality Patient Care
The ERISA Industry Committee
ERISA lawyers & employee benefits
ERISA full text
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