HMO Liability for Failure to Authorize Treatment
Wilke, Fleury, Hoffelt, Gould & Birney, LLP - Healthcare Newsletter

Liability of Health Maintenance Organizations

Can a health maintenance organization (HMO) be liable for damages sustained by one of its members for the HMO's failure to authorize payment for a certain medical procedure? The answer is yes and no. Patients can sue their HMOs for the wrongful refusal to authorize treatment in order to obtain reimbursement of money paid for medical services that should have been authorized. Thus, patients can sue their HMOs for the failure to pay for the treatment. However, patients (or, if the patient has died, his or her family members) cannot recover for any damages that resulted from not authorizing the treatment or from a delayed treatment.

The Employer Retirement Security Act of 1974 (ERISA) prevents individuals from suing their HMOs for malpractice damages for failure to authorize payment for a treatment. In response to ERISA's bar to filing suits against HMOs for damages from the refusal to authorize treatment, ten states enacted laws allowing patients the "right to sue" HMOs for failure to authorize payment for doctor-recommended treatment. Nevertheless, the Supreme Court has overturned these laws, determining that patients cannot sue HMOs that refuse to pay for recommended care for malpractice. In both of the cases decided by the Supreme Court, the patients suffered severe consequences from their insurers' refusal to authorize treatment. Two Justices of the Supreme Court did indicate, however, that it was up to Congress to enact laws to provide relief in such cases.

Congress has been attempting to enact a Patients' Bill of Rights that would impose liability on HMOs for wrongfully refusing to authorize treatment. Another Congressional bill, called PARCA (Patient Access to Responsible Care Act), would expose employers to medical malpractice liability for health care decisions they or their health plans make. Understandably, there are fierce arguments between supporters and opponents of these bills. One thing is clear, however. Until Congress enacts a law allowing patients to sue their HMOs from damages from their refusal of treatment, patients have no recourse but to try to recover out-of-pocket expenses for doctor-recommended medical treatments their HMOs refused to cover.

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