Public Health Law Map - Beta 5 - Medical and Public Health Law Site

summary judgment motion, was that the decedent had no insurance or money
to pay for any further in-patient benefits. Dr. Taff, the decedent’s treating
physician, believed that had the decedent completed his planned
hospitalization there was a reasonable medical probability that he would not
have committed suicide. The foregoing constitutes sufficient evidence to
raise a triable issue of material fact as to whether Western Medical’s conduct
was a substantial factor in causing the decedent’s death. [Wilson v. Blue
Cross of So. Cal., 271 Cal. Rptr. 876, 833 (Cal. App. 1990).]
California courts have gone on and allowed substantial awards against MCOs for
breaching their duty to treat patients fairly. A jury awarded $89,000,000 in damages,
including punitive damages, against a plan that delayed the patient’s receiving what
was then considered an experimental treatment. [Fox v. Health Net of Cal., Cause
No. 219692 (Cal. Super. Ct., Riverside Cty., Dec. 23, 1993).] Although the decision
language would indicate that plans can be liable for the consequences of their
reimbursement decisions, this is not the case for more than half of the total insured
lives in the United States, the lives that are insured in health plans subject to the
Employee Retirement Income Security Act (ERISA). [Employee Retirement Income
Security Act of 1974 (ERISA), 29 U.S.C. § 1001 (1996).] Had Wilson or Wickline
been ERISA plans, the ruling of the courts on potential liability for denying coverage
may have been very different.
C. ERISA Health Plans
The main function of ERISA is to protect and regulate pension plans. The ERISA
provision dealing with health insurance was passed by Congress to allow large
multistate companies such as automobile manufacturers to sign uniform labor
agreements across all state lines. Prior to ERISA, an employer could not offer the same
health insurance plan to all employees because state laws regulating insurance differed
from state to state. Even if the terms of the plan could be worked out, there was a
substantial cost in getting the plans approved in 50 different states. ERISA provides
that health insurance plans that meet certain organization requirements are exempt
from most state regulation. Since there is little federal regulation of insurance, this
means that ERISA plans are essentially unregulated. The insulation from state
regulation gives ERISA plans a competitive advantage so they are displacing non-
ERISA plans for most employers.
ERISA plans are under more direct pressure to limit benefits than other types of health
plans because they are not traditional insurance policies. To qualify under ERISA, the
costs of the employee medical care must be self-insured by the employer. The plan is
often administered by an insurance company and the care is provided by either an
owned or a contractor MCO. The role of the administrator is to process the claims and
manage the care. The employer pays the administration fee and all the costs of the
medical care. There is only a limited insurance component. If there are huge
unexpected costs, then they are passed on to the employer. This puts pressure on the
employer to limit coverage for expensive procedures and conditions.
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