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Supreme Court Rules States Can Help Patients Fight HMOs

In a closely divided decision, the court ruled 5-4 to uphold an Illinois law that enabled a patient to force her HMO to pay for the cost of a rare nerve operation by submitting the case to an independent review board. The health plan originally refused to cover the procedure.

The ruling will allow some 70 million Americans whose employers buy coverage from a health insurance company to utilize similar laws in some 40 states. The state laws are generally intended to let people get second opinions and call on independent review boards to make health maintenance organizations pay for procedures the doctors on the review boards deem justified.

HMO representatives said they were not opposed to independent reviews but wanted a national standard instead of relying on a wide range of state laws.

The ruling centered on deciding whether a 1974 federal law governing employee benefit plans overruled state laws designed to promote second opinions. The 1974 employee benefits law has come before the Supreme Court several times in the past, causing the court to set limits on state regulations of benefit plans.

Writing for the majority, Justice David Souter said the federal law says nothing about second opinions and that the state law is allowed. Justices Sandra Day O’Connor, Ruth Bader Ginsberg, Stephen Breyer and John Paul Stevens also supported the ruling.

In a dissent, Justice Clarence Thomas said the ruling “undermines the ability of HMOs to control costs, which, in turn, undermines the ability of employers to provide health care coverage for employees.” Chief Justice William Rehnquist and Justices Antonin Scalia and Anthony Kennedy joined Thomas in the dissent.

While consumer groups hailed the decision, the Health Benefits Coalition, which represents a group of businesses, said in a statement “the court has dealt them a blow in the battle to control the already soaring costs of healthy care for working families.”

The decision takes some pressure off Congress to pass a federal patient rights law which would create a nationwide system for independent evaluations of health plan decisions. The legislation stalled after the Sept. 11 terror attacks.

In other rulings handed down Thursday, the court reaffirmed a 40-year-old census estimating technique which the state of Utah claimed had cost it a seat in Congress, and also barred students from using federal privacy laws to sue schools that divulge personal information or educational records.

While protecting schools that provide information on a student’s academic or personal record without their permission, Justices Breyer and Souter said the federal privacy law was vague and “leaves schools uncertain as to just when they can, or cannot, reveal various kinds of information.”

The ruling does not protect schools from lawsuits filed on other grounds such as defamation, negligence or breach of contract.