Cyrus Dugger

Getting Away With Murder: Why You Can’t Sue Your HMO

This excerpt is a chapter from the book Making a Killing: HMOs and the Threat to Your Health (which you should buy).

When you next hear an insurance company executive complaining about how the insurance industry is being "victimized" by lawsuits, ask them about the subject of this post. Keep reading to understand a large and alarming loophole in our civil justice system.

"They let a clerk thousands of miles away make a life-threatening decision about my life and my baby's life without even seeing me and overruled five of my doctors," said Slidell, Louisiana resident Florence Corcoran. It is a story that echoes so many tragedies recounted in this book. But as with many of the other stories, there's a twist — a second tragedy. "They don't get held accountable. And that's what appalls me. I relive that all the time. Insurance companies don't answer to nobody."

Corcoran faced a high-risk pregnancy. Her obstetrician ordered her hospitalized, as she had been in a previous high-risk birth. Yet her managed health care company, United Healthcare, overruled her doctor and denied the hospitalization, even though it had a second opinion agreeing with the doctor's advice. Instead, Corcoran's insurer ordered home nursing for ten hours each day.

During the last month of Corcoran's pregnancy, when no nurse was on duty, the baby went into distress. Denied the monitors and care she would have had in the hospital, Florence Corcoran's baby died.

Mrs. Corcoran filed a wrongful death action in Louisiana state court, alleging medical malpractice. But because of a legal loophole that exempts health insurance companies from such lawsuits in instances where the plaintiff receives insurance through her employer, as Corcoran did, her managed care insurer could not be held liable!
The case was dismissed, but not for lack of merit. Fifth Circuit Court of Appeal Judge Carolyn Dineen King wrote that "the basic facts are undisputed," but "the result ERISA [the federal Employee Retirement Income Security Act] compels us to reach means that the Corcorans have no remedy, state, or federal, for what may have been a serious mistake." She continued, saying ERISA "eliminates an important check on the thousands of medical decisions routinely made. With liability rules generally inapplicable, there is theoretically less deterrence of substandard medical decision making."1

"If I go out on the street and murder a person, I am thrown in jail for murder and held accountable," said Corcoran. "What's the difference between me and this clerk thousands of miles away making a life decision which took the life of my baby and she gets off scott-free and keeps her job?"

This is the dirty little secret that lets HMOs walk away from responsibility for denying or interfering with medically appropriate treatment. Corporate health providers that administer employer-paid health benefits are above the law. How big is this loophole that Florence Corcoran and her baby fell through? Fully 125 million Americans with employer-paid health coverage in the private sector are unable to sue their HMOs or insurers for damages — no matter how egregious the HMO conduct or serious the consequences of the treatment denial. HMOs can operate with virtual impunity.

How did they get this shield of immunity?

In 1987, creative insurance-industry lawyers convinced a majority of the Justices of the U.S. Supreme Court that the federal Employee Retirement Income Security Act of 1974 or ERISA put the industry above state common law — under which damages are available to injured consumers.2 How did they convince the highest court in the land? Company lawyers argued that the corporation was not technically in the business of insurance but merely an administrator of employee benefits. This meant that it could not be held accountable under state laws, but was subject to ERISA's federal scheme, which provides little remedy, as discussed in more detail below.

(Continue reading the full chapter)

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Posted at 9:36 AM, Nov 10, 2006 in Consumer Rights | Health Care | Health Insurance | Insurance Industry | Liability Immunity | Under Regulation
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