Alternative Dispute Resolution
Jun. 21, 2002
HMO Lawsuit Bill Fails in Committee
SACRAMENTO - Trial lawyers and consumer groups have suffered a significant setback in their efforts to chip away at mandatory arbitration clauses.
The state Assembly Health Committee killed a measure Tuesday evening that would have allowed patients to sue their health service plans if their refusal to pay for medical care resulted in substantial harm.
The measure, SB458 by Sen. Martha Escutia, D-Whittier, had already passed the Senate. It needed 10 votes to pass the health committee, but supporters managed to wring out only six after a two-hour hearing. A lobbyist for the bill's sponsor, the Foundation for Taxpayer and Consumer Rights, said the bill has a remote chance to win passage on reconsideration.
Trial lawyers are having better success with a bill that would prohibit binding arbitration in employment claims covered by the Fair Employment and Housing Act. That measure, SB1538 by Senate Pro Tem John Burton, D-San Francisco, recently passed the Assembly Judiciary Committee and is pending before the Assembly Appropriations Committee.
Committee Chairwoman Helen Thomson, D-Davis, who voted against the HMO arbitration bill, said she agreed with opponents who argued that allowing patients to go to court instead of arbitration would cause a hike in health insurance premiums. Supporters said similar laws in Texas and New Jersey have not affected premiums.
Escutia's bill is a follow-up to 1999 legislation, SB21, which made managed health care groups liable for denying services that cause patients significant bodily or financial injury. The taxpayers' foundation contends HMOs have used mandatory arbitration as a means of getting around SB21 and are denying patients access to the courts.
Opponents of the bill include Kaiser Permanente Medical Group, the Chamber of Commerce and several medical groups including the California Medical Association.
Michael Hawkins, a lawyer and lobbyist for Kaiser, told the committee his group is already encountering cases in which trial lawyers are trying to get around the limits on damages for pain and suffering under the Medical Injury Compensation Reform Act of 1975. He said plaintiffs lawyers are converting medical malpractice suits, which are subject to MICRA's limits, into medical coverage cases, which have no limits.
In one Southern California case, Hawkins testified, a patient sought experimental cancer treatment, but the patient's physician recommended against it. After exhausting Kaiser's grievance procedure, the patient sued Kaiser contending the medical group had improperly denied coverage.
"We have noticed over the past three, four or five years a significant number of cases that are medical malpractice and have a managed care component," Hawkins said.
If a judge decides not to dismiss the case but rather to bifurcate it, sending the medical care coverage issue to arbitration and keeping the medical malpractice issue in court, that would double litigation costs and raise legal questions, he said.
"There are legal questions such as which case goes first?" Hawkins said. "They are based on the same facts. Does res judicata apply? Can you use the arbitration award in court, or can you use the award in court to bar arbitration from going forward? Those are interesting legal questions raised. We don't want to face that situation."
Escutia emphasized that the bill would make arbitrations voluntary only in those few cases involving substantial injury. Kaiser has estimated that only 4 percent of its claims would fall into that category.
Linda Rapattoni
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