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The Patients' Bill of Rights: by Julie Athey Whew! With members of Congress getting ready to return from their summer break, we hardly have time to jump in with an article about the most contentious issue on Capitol Hill this year: the managed care reform legislation more commonly referred to as the Patients' Bill of Rights. As you probably already know, the Senate passed a primarily Democrat-backed bill (S. 1052) earlier this summer. The House of Representatives followed close on its heels to pass a Republican version (H.R. 2563) on August 2, just before taking its summer break. The next step is for a conference committee comprised of members of both houses to meet to negotiate on a compromise version of the bill. An identical bill must be passed in both houses before it can be sent to President Bush for his signature or veto. In spite of the fact that the bills are practically identical, there is plenty of doubt as to whether the two legislative bodies will be able to resolve their remaining differences in a manner that will also be acceptable to President Bush. Let's take a look at the major provisions of the two bills and the major criticisms of them. Liability Issues As we explained in our June issue, the only true remaining hurdle to getting patients' rights signed into law is the difficult question of whether and how employees should be allowed to sue their health plans and/or employers. To understand this issue, you have to first understand a little bit about the history of litigation under the main law that governs employee benefits - ERISA. ERISA is a prototypical example of a good law that has had some not-so-good unintended consequences. It's widely agreed that when ERISA was signed into law in 1974, no one thought they were cutting off the rights of employees who receive health insurance through their employers to sue their HMOs for injuries they suffer when their medical claims are wrongly denied. That side effect didn't become obvious until courts started interpreting the law to preempt any lawsuits that don't arise under ERISA. Under this rationale, an employee whose HMO wrongly denies her claim can sue for breach of contract, but not for any injuries she suffers because of the denial. Here's a hypothetical example: Marjory has a medical condition that causes her to be severely obese and that, in turn, gives her high blood pressure and puts her at high risk for stroke, heart attack, diabetes, and a number of other serious ailments. Under her doctor's supervision, she has been trying unsuccessfully to lose weight under a strict diet and exercise regimen for several years. Marjory's doctor tells her he would be surprised if she lives another year if she doesn't lose the weight. He believes that her only option is to undergo a very expensive "stomach stapling" surgery. Marjory seeks pre-approval for the surgery from her HMO, but it denies the claim because the surgery is not medically necessary. In other words, the HMO thinks Marjory should lose the weight without surgery even though her doctor says she can't. Marjory doesn't have the surgery, and a year later she has a stroke that leaves her permanently disabled. She can sue the HMO for breach of contract and, if she wins, may be able to recover the cost of the benefit that was denied - the surgery. But she can't sue for her pain and suffering, loss of income, additional medical care, and so on that resulted from the wrongful denial of her claim. The end result is that a law that was intended to protect employees has been turned around to shield insurance companies. How has this happened? It's pretty complicated legally, but the real world explanation is that when ERISA was enacted, most people got the medical care they needed regardless of whether their insurance would cover it. So it didn't seem like a big problem to limit damages in lawsuits to the cost of the medical care the employee should have been reimbursed. But over time, HMOs' "insurance" decisions have grown to look more and more like medical decisions. If they refuse to pay for an employee's costly cancer treatment, the chances of the employee getting that treatment are slim to none. They are far more likely to get sicker or die as a result. But even if the HMO's decision was totally arbitrary and medically unwarranted, the employee can't sue it the way they can sue other professionals like doctors and lawyers who make bad calls. For a more detailed discussion of the history of ERISA, see "The Fight Over the Patients' Bill of Rights: Why Hatred of Trial Lawyers Plays a Large Role," at http://writ.news.findlaw.com/sebok/20010813.html. Employer liability. As an employer, your most immediate concern is probably whether it will be easier for your employees to sue you if some form of patients' rights legislation becomes law. The bills passed in both houses of Congress try to protect employers from employee lawsuits over coverage determinations made by their health insurers. Senate Republicans included a provision in their bill to prohibit all lawsuits against employers, but that provision didn't make the cut in either the Senate or the House. Instead, the bills establish the general rule that employers can't be sued unless they directly participate in making claims decisions or reviewing internal appeals from claims denials. They also go a step further to create a sort of "safe harbor" for employers, allowing them to name a "designated decisionmaker" to make and assume liability for all claims decisions. The bills even deem the health insurer to be such a designated decisionmaker unless the employer has provided otherwise. Now, it is true that few employers involve themselves in claims decisions. So, it would seem that the law will protect you as long as you mind your own business and let the health insurer do its job when it comes to approving or denying employees' claims for health benefits. That is, you'll be protected unless you're one of the many employers that sponsor a self-insured health plan for their employees. These self-insured companies are directly involved in administering health benefits, making claims decisions, etc., on a daily basis. It's doubtful whether the "designated decisionmaker" language will protect these employers. Proximate cause. What a difference a tiny little word can make; in this case, the word we're talking about is "the." Up until the very last moments before the House passed its version of patients' rights, it contained the same language as the Senate bill on the issue of causation. In short, both bills imposed liability for claims decisions that were "a proximate cause of personal injury to, or the death of, the participant or beneficiary." The final bill passed by the House, however, reportedly changed this provision to impose liability only for claims decisions that are "the proximate cause" of personal injury or death. What difference does this make? Potentially a lot. The problem is best illustrated with an example. Let's say you have an employee with a particularly virulent form of cancer. Now, without treatment, she will surely die. Obviously, the cause of death is cancer. But what if she could have been saved with a cutting-edge form of radiation therapy that the insurance company wouldn't pay for? In this case, the insurance company's refusal to pay for her treatment is also a cause of her death. But the question is, which is the proximate cause? The Senate bill - by using the words "a proximate cause" - recognizes that there can be more than one cause of death: the cancer and the denial of coverage. But the House bill requires that the denial of coverage be "the proximate cause of death." That's a much harder standard to meet because obviously the actual cause of death (the one that will go on her death certificate) is cancer. According to an editorial in the LA Times, key House Republicans have stated that this was a "mistake" that will be "fixed" during negotiations on a final bill. Preemption of state patients' rights laws. Another big difference in the House and Senate bills is the effect of the legislation on existing patients' rights legislation passed by the states. While the U.S. Congress has been dragging its tail on this legislation the last six years, impatient state legislatures have stepped up to the plate to pass their own versions of managed care reform. In general, states are allowed to do this as long as they provide at least as much protection as federal law. The Senate bill does not affect the validity of these state laws. But the House bill appears to override any state laws that go further than it would in imposing liability on insurers and employers. This is sure to be one of the most significant points of debate as the two houses of Congress try to reach a compromise deal to get patients' rights passed this year. Other issues. Finally, the two bills differ significantly on a number of other liability issues. They contain different provisions regarding:
Other Provisions As mentioned, the two bills approved by the House and Senate are practically identical in most respects. For example, both address the common HMO practice of requiring insureds to choose a primary care physician who refers them to specialists if needed. Both pieces of legislation would require HMOs to recognize certain exceptions to this requirement - for example, by allowing women direct access to an OB/GYN without going through the hassle of obtaining and updating referrals from their primary doctor. The problem with these other provisions is that - while they may have been valid six years ago when managed care reform was first proposed in Congress - they're practically moot now because most HMOs already comply with them. As Brooklyn law professor Anthony Sebok put it, "It is easy to agree to grant patients the right to get something they already receive, and that is exactly what, for the most part, both versions of the bill have done."
Copyright 2001 M. Lee Smith Publishers LLC. This article is an excerpt from BENEFITS & COMPENSATION LAW ALERT. Benefits and Compensation Law Alert is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that neither the author(s) nor its publisher is engaged in rendering legal, accounting, or other professional services through its pages. If legal advice or other expert assistance is required, the services of a competent professional should be sought. (From a Declaration of Principles jointly adopted by a committee of the American Bar Association and a committee of Publishers and Associations.)
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