More and more people have been seeking legal action against their HMO's because of a failure to cover treatment that was originally in their insurance policy. Tom Bearden has the report.
TOM BEARDEN: Jerry Cannon's wife died from leukemia in 1992. He thinks she might be alive today if her health insurance company had approved a bone marrow transplant in time. Phyllis Cannon was diagnosed with acute leukemia in 1991. But there was hope.
JERRY CANNON: The doctor told us that a bone marrow transplant was the only cure for her disease. And I looked in my insurance policy, and it said it would cover it, and I called the insurance company, and they said they would cover it.
TOM BEARDEN: The doctor said Phyllis had to undergo chemotherapy first because the transplant couldn't be done until the cancer was in remission. Almost a year later, the Cannons found out that Phyllis was in remission. They went to the doctor's office in nearby Oklahoma City to arrange the transplant. But after they left--
JERRY CANNON: The phone rings about 5 o'clock. They had called to get authorization from the insurance company, which, you know, which you need to do, and they denied it. They said they wouldn't do it. You know, and I was in disbelief. I said, this can't be correct.
TOM BEARDEN: Blue Links of Oklahoma City, a Blue Cross HMO, was refusing to pay for the $150,000 operation. The Cannons received a letter saying, "Phyllis Cannon does not qualify for the transplant." The policy had been changed, and it wasn't covered anymore. Jerry Cannon appealed the decision to the HMO's grievance committee. After two months, the Cannons received another letter saying Blue Links had reversed the decision and would provide benefits for a bone marrow transplant. But it was too late. That two months proved to be fatal when Jerry Cannon took his wife back to the doctor to prepare for the transplant.
JERRY CANNON: At that time they told her that the leukemia was back and that she'd have to go through the chemotherapy again, and the bone marrow transplant was not possible.
TOM BEARDEN: Phyllis Cannon died a few weeks later.
JERRY CANNON: After a period of time, I went to see an attorney, and told him the story, and then he asked me the question: Do you pay for your insurance, or does your employer pay for your insurance? I said, in my case I pay for it. Phyllis's employer pays hers. He says, I'm sorry, I can't help you. He says, there's a law called ERISA. And he says, based on this law, you can't sue your insurance company for wrongful death or bad faith.
TOM BEARDEN: That is, you can't sue if your employer pays for your insurance. ERISA, the Employee Retirement Income Security Act, was passed by Congress in the 1970's. It was designed to shield pension and benefit plans from lawsuits, but it had the unintended effect of exempting HMO's from being sued for medical malpractice. Congressman Charlie Norwood says the Cannon case is not unique. Norwood is a conservative Republican from Georgia and a former small town dentist. He recently held a congressional field hearing in Augusta where consumers testified on coverage problems with their HMO's.
REP. CHARLES NORWOOD, (R) Georgia: There is no industry in this country today, other than the federally-governed health insurance, that enjoys a congressionally-mandated shield from any liability for their actions. Nowhere else in our society can one person intentionally injure another and just simply get away with it.
TOM BEARDEN: Norwood has introduced a bill in Congress that would change ERISA and permit consumers to sue an HMO for malpractice.
REP. CHARLES NORWOOD: What we're saying is that if you want to make medical decisions, decisions of medical necessity, then you have to be responsible for those decisions in a state court of law. I think that's pretty reasonable. If you don't do that, then 160 million people lose their rights, their due process of law. There's nowhere to turn.
TOM BEARDEN: But Karen Ignani says that the decisions HMO's make don't qualify as medical decisions. Ignani is president of the American Association of Health Plans, which represents more than a thousand HMO's, PPO's, and other similar insurers.
KAREN IGNANI, American Association of Health Plans: If the physician is told that he or she should not proceed with a particular course of treatment, this is based on evidence-based protocols based on the best practices in treating and dealing with a particular form of--a particular problem, if you will.
TOM BEARDEN: HMO's claim they issue guidelines for procedures that experience has shown render the best outcome for the patient and that guidelines are not medical decisions. Attorney Jo Slama disagrees.
JO SLAMA, Lawyer: If they're overriding the medical doctor's decision and recommendation about treatment, they are making medical decisions. No matter how you want to characterize it, that's, in fact, what they're doing.
TOM BEARDEN: Slama was the one lawyer Jerry Cannon found in Oklahoma willing to take his case and challenge ERISA in the courts. The judge ruled in favor of the HMO, saying that according to federal law, Cannon could not sue. Slama appealed, taking the case all the way to the Supreme Court. But the high court refused to hear it. Blue Links refused our request for an on-camera interview, but a spokesperson said the HMO agreed with the court's decision. Attorney Slama has long specialized in ERISA cases. She told producer Mary Beth Dirken she's seen more people seeking legal action against their HMO's.
JO SLAMA: With more and more HMO's and more and more people becoming insured by HMO's, we are seeing more of these types of cases. Frankly, I attribute that to the fact that HMO's know that they can automatically deny claims and very rarely will they ever be challenged either through their administrative appeals process or through the court system.
TOM BEARDEN: Not so, says Karen Ignani. She contends the ERISA shield has no bearing on the decisions HMO's make.
KAREN IGNANI: I'm very pleased to report to you there was a recent study released just last fall that showed that, on average, only 3 percent of procedures that were recommended by physicians were ever denied, which means that 97 percent were approved.
TOM BEARDEN: The report the Managed Care Association refers to was a 1995 Blue Cross-Blue Shield survey of 2,003 practicing physicians nationwide, of which 53 percent responded. But attorney Slama says she sees something different.
JO SLAMA: I'm just one lawyer in Oklahoma City, and I see case after case after case. I get phone calls literally every day from people who are being denied care.
TOM BEARDEN: A number of congressmen and senators say they've been besieged by constituent complaints about HMO's. Norwood's bill has amassed 224 co-sponsors from urban liberals to liberal conservatives, equally split between Republicans and Democrats. It's called PARCA, the Patient Access to Responsible Care Act. At the same time, 26 states have also introduced bills that would allow consumers to sue their HMO's for medical malpractice. Texas was the first to pass such a bill just last summer. But it's uncertain whether a state law would override a federal statute. And, in fact, AETNA has brought suit challenging the Texas law. It's the federal PARCA bill that has employers like Jim Greene more worried because it would apply to all 50 states and be undisputable. Greene's a risk manager for Justin Industries, a $450 million company in Ft. Worth that makes cowboy boots. Greene was part of an unsuccessful lobbying effort to defeat the Texas law. He believes PARCA would lead to costly court battles and higher insurance premiums.
JIM GREENE, Justin Industries: I can only tell you that the studies that have been done--an independent accounting firm, Milliman and Robertson, did an analysis of PARCA, and they estimated the increase in health care cost, if PARCA were enacted as it's currently written, between 23 and 39 percent.
REP. CHARLES NORWOOD, (R) Georgia: That's nonsense. I mean, that is so unreal it's nonsense. Our actuarial firm came up with cost of increase premium somewhere between .7 and 2 percent. Our bill will increase some, but it will protect the lives of many people.
TOM BEARDEN: Regardless of how large the increase is, many employers say they'll have to pass it on to their employees in the end. They argue that fewer employees would be able to afford insurance as a result. And so a number of large corporations have joined health management companies to lobby for the defeat of the bill, claiming it won't benefit consumers but only set off a flood of litigation that would primarily benefit lawyers.
JIM GREENE: Lawsuits only help the heirs, if you will, of the person's who now no longer with us and the attorney who filed the lawsuit. That's a wrong end of the solution. Wouldn't it be better that if you have a dispute over a coverage issue or a recommendation for a treatment issue that there be some mediation process with a very tight time line that says if there's a coverage question, it's going to go to an arbitration panel of qualified medical providers to determine whether or not number one, it's medically necessary, number two, whether it's covered under the terms of the policy contract?
TOM BEARDEN: Ignani suggests that strengthening the appeals and grievance processes that most HMO's already have in place is a better solution to the problem than costly court battles.
KAREN IGNANI: Should government basically come in and micro manage the way these systems work and micro manage the whole process of patient-physician communication and micro manage the way physicians deal with the health plan? I think not.
TOM BEARDEN: But Slama says without government involvement, HMO's have all the power.
JO SLAMA: When the evidence is all submitted through the appeals process for an appeal, who is making the decision? Not a court, not an independent arbitrator, not an independent third party, not even an independent health care provider. It's the very HMO that denied the care in the first place. So what kind of an appeal is that? What people are giving up when they buy their insurance through their employer is a chance to have a judge and a jury of their peers make that decision and, instead, turning that right over to the very insurance company that denied them in the first place.
TOM BEARDEN: Congressman Norwood thinks the solution has to be in the courts.
REP. CHARLES NORWOOD: Now, I understand how the other side is scared to death of this because of the legal system. They fear frivolous lawsuits; they fear the deep pocket syndrome. Does it mean that there are a group of trial lawyers who will try to take advantage of the system? Absolutely. But that's not a good enough reason to deny due process of law to 160 million American people. Let's have legal reform. That's the other side of this coin.
TOM BEARDEN: Jerry Cannon flew all the way from Oklahoma City to Augusta to testify at Norwood's hearing, hoping some day if PARCA passes, he'll get his day in court.
JERRY CANNON: First of all, I'd like to thank you for giving me the opportunity to come in and visit with you about this issue.
TOM BEARDEN: Cannon may have to wait until next year for results. The bill hasn't yet made it out of committee and faces opposition from key Republican leaders, who say it will end up making health care more expensive.