Chance for Key HMO Reform

A San Bernardino jury’s $116-million verdict against Aetna U.S. Health Care two weeks ago tells more about the public’s simmering frustration with the managed care health system than about how to fix it. The jury’s award, the largest to date against an HMO, was punishment for denying a now-deceased patient access to cancer experts.

Consumer advocates called the verdict a great victory for patient rights, but in fact it has no relevance to most working Americans--those who are directly insured by private employers. That’s because the 1974 Employment Retirement Income Security Act (ERISA), seeking to encourage more employers to provide insurance, prohibited suits against employer-insurers for more than the cost of the care withheld. The unintended result was that when large managed care organizations arose later, they were virtually unaccountable for the quality of their care. In the San Bernardino case, the patient was a government employee, exempt from ERISA.

A broad range of health care policy groups, from the liberal Urban Institute to the conservative Heritage Foundation, agrees that the ERISA loophole needs to be fixed. Rather than responsibly reform ERISA, however, many federal lawmakers last fall gravitated to one of two special-interest extremes: following trial lawyers who seek to remove all restrictions on lawsuits or following managed care executives who argue that the present system has plenty of consumer protections.

A middle ground does exist and is growing. The National Coalition on Health Care, a group representing dozens of labor and business groups, has been meeting with business leaders to get them to prod legislators back to a sensible reform path. That means adhering to good medical standards, allowing patients a fair hearing and guaranteeing fast, independent resolution of disputes.

Some big business groups are still fighting even nominal ERISA reform. Led by the U.S. Chamber of Commerce, they oppose prompt review of complaints about coverage denials and back a bill introduced last fall by then-Rep. Newt Gingrich (R-Ga.) that would allow insurers to define what is “medically necessary” even if their definitions conflict with national standards of good medical practice.

These businesses should understand the long-run benefits of bills like one introduced last fall by Sen. John H. Chafee (R-R.I.) to require ERISA plans to base treatment on “generally accepted principles of professional practice.” The bill also requires insurers to give patients the option of appealing coverage decisions to independent external reviewers.

Most health care policy experts believe that states should oversee such external review systems, which is why Gov. Gray Davis and his new Health and Human Services secretary, Grantland Johnson, should convene a panel to devise ways to keep reviewers free of direct insurer subsidies and put some teeth in their decisions. The state should also guarantee managed care patients the right to independent arbitration.

Applying basic patient protections to ERISA plans is the best way to reassure an angry American public. Reforms would also deprive trial lawyers of the cynical argument that only enormous lawsuits will restore Americans’ faith in managed care. If honest reforms are blocked, the lawyers’ argument will inevitably gain steam.