Suing HMOs and ERISA

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With the current emergence of HMOs in the health care field you would expect a similar rise in litigation against HMOs for negligent health care. Due to uncertainties over federal preemption under ERISA and its treatment of employee benefits, this has not occurred.

Alphabet Soup: Suing HMOs under ERISA

One of the keys to success for a plaintiff trial lawyer practice is finding the right parties. Obviously, having a good plaintiff is very important. Just as important, if not more so, is having a good defendant – defined here as a defendant whose credibility and public perception is poor.

Such as, for example, an HMO.

Few contemporary entities are held in such scorn as are HMOs. Current studies show consistently that the public neither likes nor trusts HMOs and perceives HMOs as placing profit over proper health care.

From a plaintiff trial lawyer’s perspective, this makes a perfect defendant. Given the rapid emergence and domination of HMOs in the health care field, you would have expected a similar boom in litigation against HMOs for negligent health care.

Due to uncertainties over federal preemption under ERISA, however, this has not occurred. The headlines are filled with news of proposed “Patient’s Rights” legislation on both federal and state levels, which would presumably include some form of clarification of patient’s rights to sue HMOs for negligence or medical malpractice. Opposed bitterly by HMOs and every tort reform organization in the country, Patient’s Rights bills are, at best, some time away and likely to be watered down. In the meantime, federal law governs. This article looks at some of the issues involved in HMO litigation under existing law.

This area of law begins with the premise that, despite HMO arguments to the contrary, HMOs are practicing medicine. When HMOs allow accounting and business concerns to prevail over professional medical judgment, HMOs are practicing medicine. When an HMO says “no” to an expensive medical procedure needed by a patient who has no access to the procedure through any other means, the HMO has malpracticed no less than the health care provider who deviates from the standard of care by failing to recommend the procedure.

Federal law under the Employee Retirement Income Security Act of 1974 [ERISA] governs employee benefit plans, which includes health insurance.

Since under the American model health insurance is provided predominantly as an employee benefit, ERISA is the first concern in bringing such cases. ERISA’s § 514(a), 29 U.S.C. § 1144(a) provides federal preemption of all civil actions “insofar as they may or hereafter relate to any employee benefit plan.” If this extraordinarily broad language applies to pre-empt a state law claim such as for medical malpractice claim against an HMO, the patient simply cannot sue the HMO in court – period. Try explaining to the family of an HMO-insured medical malpractice victim that their only remedy is to recover the cost of the treatment that the HMO denied!

Whether ERISA actually preempts civil actions in particular cases is a murky area.