Last Update: June 2000
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A Victory For Texas Families:
Court Upholds Right To Hold HMOs Accountable

On June 20, 2000, a three-judge panel of the 5th Circuit U.S. Court of Appeals upheld a landmark 1997 Texas law allowing consumers to hold their HMOs liable if they feel they received poor care, rejecting claims by subsidiaries of insurance giant Aetna that the statute was barred by the federal ERISA law.

However, the ruling in Corp. Health Ins. Inc. v. TX Dept. of Insurance limits the types of suits that can be brought, and does not offer any state court relief for a patient whose HMO determines that a requested treatment is not medically necessary.

Despite this minor setback, plaintiff's have expressed the belief that suits against HMOs can be worded so as to avoid this limitation.

In a setback for state regulators, the 5th Circuit also refused to reinstate a popular provision in the 1997 law requiring insurers to offer patients the opportunity to seek an independent review of any treatment denials.

Texas was the first state to explicitly allow lawsuits against HMOs. At least six other states have subsequently approved similar measures, and Congress has been debating a national Patients Bill of Rights for two years.

The U.S. House approved legislation last year that would give insured Americans the right to sue for damages in state court if they believe their health plan erred in deciding that a treatment was not medically necessary. A similar measure, passed by the Senate, does not include a right to sue. A conference committee is attempting to work out the differences between the bills.

According to experts in a June 21, 2000 article appearing in The Dallas Morning News, the 5th Circuit's decision would allow lawsuits in state court that allege:

But the court's ruling continues to forbid lawsuits in state court that stem from a treatment denial or a determination that a procedure is not medically necessary. For instance, if a health plan rules that a hysterectomy is not medically necessary, and a patient suffers harm, this ruling would prevent a state court lawsuit seeking damages from the HMO.

On June 12, 2000, the U.S. Supreme Court ruled that consumers could not sue a health plan in federal court on grounds that it offered doctors financial incentives to reduce their medical expenses. The court's ruling, though, opened the door to state court lawsuits arising from those same incentives.