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Letters to the 107th Congress

July 25, 2001

Dear Representative:

We understand that this week the House may begin debate on legislation aimed at creating a "Patients' Bill of Rights," including H.R. 2563 (sponsored by Reps. Ganske, Dingell, Norwood, and Berry) and H.R. 2315 (sponsored by Reps. Fletcher and Peterson). The ABA believes it is imperative that the House pass legislation that provides adequate remedies for patients in employer-sponsored health care plans. Without inclusion of such remedies in the legislation, many patients often will have no effective means of redress when their plans improperly refuse to provide appropriate medical services.

As the national voice of the legal profession in the United States with over 400,000 members, the American Bar Association has a strong interest in working with Congress and the Administration in order to ensure that our nation's health care laws protect the legal rights of all patients.

The ABA believes that in order to adequately protect patients' rights, any "Patients' Bill of Rights" legislation should contain provisions that would: (1) create a rigorous system of internal review and an independent system of external review of benefit payment requests, adverse coverage determinations and medical necessity determinations, consistent with certain due process principles, and (2) remove the ERISA shield to allow the states to hold employer-sponsored plans accountable under the health care liability laws in state courts in the same way as other health care plans are held accountable. Accordingly, we urge you to support legislation that would achieve both of these important objectives.

Internal and External Review

The ABA supports the right of all consumers to a fair and efficient process for resolving differences with managed health care plans, health care providers, and the institutions that serve such plans and providers, including: (1) timely written notification and explanation of a decision to deny, reduce or terminate services or deny payment for services; (2) a rigorous system of internal review; and (3) an independent system of external review. The ABA also supports enactment of legislation establishing alternative dispute resolution procedures-including the use of external review-as one remedy for resolving these disputes between patients and their managed health care plans.

Both the Ganske bill, H.R. 2563, and the Fletcher bill, H.R. 2315, contain provisions that would give HMO patients the right to have adverse coverage decisions by HMOs reconsidered-and in some cases reversed-through a system of internal and external review. While both bills would create a system of internal and external review, we believe that certain key external review provisions contained in H.R. 2563 would better protect patients' rights.

Section 104(h) of H.R. 2563 contains numerous safeguards designed to guarantee the independence of the external review entities and hence the impartiality of the review process itself. One of the most important safeguards in the bill is the provision found in Section 104(h)(1) that provides that neither the health plan nor the patient will have the power to actually select the external review entity in individual cases. By contrast, Section 131 of H.R. 2315 contains ambiguous and seemingly contradictory language regarding the procedure for selecting external review entities. Although H.R. 2315 states that neither the health plan nor the patient will have the power to determine or influence the selection of an external review entity, another provision in Section 131 of the bill specifically grants the health plan the right to select the external review entity that will hear and decide the patient's claim.

In order to maintain the true independence of the external review entities, the ABA believes that both the patient and the health plan-not the health plan alone-should select the review entity. Otherwise, the review panels should be selected by a neutral party, such as by the Secretary of Health and Human Services, the Secretary of Labor, or individual states. For these reasons, we believe that the language establishing procedures for the selection of external review entities contained in H.R. 2563 is clearly preferable to that found in H.R. 2315.

The ABA also believes that H.R. 2563 will protect patients' rights better than H.R. 2315 by granting patients greater access to the external review process. H.R. 2563 contains numerous provisions designed to encourage patients to seek external review when a medical benefit has been improperly denied. In particular, the bill provides that when a patient's internal review claim has been denied, the patient will have a full 180 days in which to seek external review. By contrast, H.R. 2315 grants the patient just 90 days to file for external review. In addition to providing longer deadlines for seeking external review, H.R. 2563 also encourages the greater use of external review by not setting any minimum threshold for the size of disputes that are subject to review. H.R. 2315, on the other hand, would only allow patients to seek external review if their claims exceed $100.00 or if a physician has certified in writing that the continued denial of care poses a significant risk to the life, health, or development of the patient. Furthermore, H.R. 2563 will encourage more patients to utilize the external review process by limiting the patient's filing fee to no more than $25.00 per claim. H.R. 2315, on the other hand, would permit HMOs to charge most patients as much as $50.00 per claim, and that amount would increase annually at the rate of inflation starting in 2003.

The ABA also believes that H.R. 2563 will provide greater procedural protections than H.R. 2315 for patients with medical emergencies who are seeking expedited external review of their claims. Under Section 104(e) of H.R. 2563, the independent medical reviewers generally must decide emergency appeals of medical benefit claims "in accordance with the medical exigencies of the case and as soon as possible, but in no case later than 72 hours" after the external review is requested. Section 131 of H.R. 2315, on the other hand, would give the independent medical reviewers up to 72 hours to decide emergency appeals, irrespective of whether the medical exigencies of the case call for a faster decision. The ABA believes that external review proceedings should occur within a reasonable time, and without undue delay. For truly acute emergencies-such as when the life, health, or future function of the patient is at stake-such decisions should be rendered as soon as possible, certainly in less than 72 hours. For these reasons, the ABA believes that the expedited external review timelines contained in H.R. 2563 would protect patients' interests better than those contained in H.R. 2315.

By creating an effective system of internal and external review, Congress can help patients to receive the care to which they are entitled under the HMO policy. While both House bills would establish internal and external review procedures as a means of resolving coverage disputes, H.R. 2563 would create a far more meaningful external review system, with greater procedural protections, than would H.R. 2315. Therefore, we urge you to support the external review provisions contained in H.R. 2563.

Removing the ERISA Shield

The ABA supports amending the Employee Retirement Income Security Act of 1974 (ERISA) to allow causes of action to be brought in the state and territorial courts against employer-sponsored health care plans under state and territorial health care liability laws. It is crucial for legislation to be enacted to address the inequities under current law by amending ERISA in this manner. The ABA also supports and encourages utilization of alternative dispute resolution mechanisms prior to the filing of such causes of action. However, legislation providing for internal and external review of health care disputes, though useful, is not adequate if there is no ultimate consequence for denial or delay in providing necessary care. By removing the ERISA shield, there will be consequences for those plans that do not act appropriately.

Under ERISA, health plans that contract with ERISA employers to provide health care coverage have largely been able to shield themselves from liability for health care treatment decisions that cause harm to patient-enrollees. HMOs and other kinds of employer-sponsored managed care companies should be held responsible if a decision they made to deny or delay medically necessary care that is covered under the insurance policy results in harm to a patient. These entities should be held to the same standards of accountability we expect of doctors, nurses, hospitals, and other health care providers. Enrollees in such plans should be able to bring a state cause of action against their plans under state liability laws in the state courts-just as enrollees do now who either buy insurance directly (rather than through an employer) or are covered as employees of a state or local government.

Although both the Ganske bill, H.R. 2563, and the Fletcher bill, H.R. 2315, would amend ERISA to allow patient-enrollees in employer-sponsored plans, or their estates, to bring an action against their health plans under certain circumstances, the liability provisions of the two bills differ in many important respects.

H.R. 2563 would amend ERISA to permit injured patients in employer-sponsored plans to bring a cause of action against their health plans. Cases regarding the terms and conditions of plans would be brought in federal court and cases regarding medically reviewable issues, including those based on delay or denial of treatment by a health plan, would be brought in state court under state law.

H.R. 2315 contains a number of roadblocks to accessing the courts that are not contained in H.R. 2563. H.R. 2315 would allow an injured patient to bring an action in state court for decisions to delay or deny care but would do so only if a health plan ignored the decision of an external reviewer. The ABA believes that the decision of an external review panel should be subject to judicial review in the courts.

H.R. 2315 also allows an injured patient to file a cause of action in the federal courts, but only when the decision-maker improperly denies a patient coverage and the external review entity sides with the patient. H.R. 2315 also contains hurdles for the patient who brings a cause of action against a designated decision-maker in the federal courts. For example, the bill would create affirmative defenses for the decision-maker when: 1) the external review entity or independent reviewer failed to meet certain timelines; 2) the patient or the treating doctor failed to relay information that was requested by the plan; or 3) the patient or treating doctor were in possession of facts that were sufficient to enable them to show that an expedited review would have prevented harm, and failed to notify the plan of the need for an expedited review. In addition, H.R. 2315 also contains an ill-advised cap of $500,000 on non-economic damages for injured patients.

The ABA supports allowing a cause of action to be brought by patients against employer-sponsored health plans in state courts under state liability laws. Congress enacted ERISA in 1974 primarily as a means of protecting working Americans from fraud and mismanagement in their pension benefit plans. Less than a decade after passage, however, the interpretation of ERISA by some courts had the unintended consequence of preempting state health care liability laws.

The ABA respectfully suggests that Congress not follow the approach in the Fletcher proposal, H.R. 2315, because of its strict limitations on the ability of patients to hold health plans accountable in court. Instead, we suggest that the House pass legislation like the Ganske proposal, H.R. 2563, that eliminates the federal preemption of state health liability laws and allows injured patients to bring their actions based on medically reviewable decisions, in whole or in part, in state courts under the carefully developed laws of the states.

Opponents of legislation to permit patients to sue their employer-sponsored health plans for damages under state law say that such legislation will result in employers being forced to offer more restrictive or no health care benefits to their employees due to increased litigation costs. This would not be the case. A 1998 study by the Henry J. Kaiser Family Foundation studied the extent of litigation in certain insurance programs where patients have long had the ability to sue health plans. Patients who buy insurance directly, rather than through an employer, and patients who are covered as an employee of a state or local government have never been subject to ERISA's preemption.

The Kaiser study found very low rates of litigation by these patients against the public insurance systems it researched, ranging from 0.3 to 1.4 cases per 100,000 enrollees per year (with estimated monthly costs ranging from $0.03 to $0.13 per enrollee). The Congressional Budget Office has also scored the legal accountability provisions in legislation along the lines of H.R. 2563 as raising premiums by less than 1% if enacted. For plans that currently make an effort to cover the care and treatment required by their policies, the premiums would not be expected to increase much, if at all, under the proposals to remove the ERISA shield.

Thank you for considering the views of the ABA on this important legislation.

Sincerely,

Robert D. Evans
Director, Governmental Affairs Office

107th Congress Letters Home

AMERICAN BAR ASSOCIATION
Governmental Affairs Office
740 Fifteenth Street, NW
Washington, DC 20005
ph: 202-662-1760
fx: 202-662-1762

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