Significant Employer Concerns Remain with Senate-passed Patients' Bill of Rights
State Court Liability: No changes were made in the Kennedy-McCain provisions that allow individuals to sue in state courts for damages over disputes involving "medically reviewable" health claims, meaning health claims that are eligible for independent external medical review. The bill sets no limits at all on the amount of state court awards for economic, non-economic or punitive damages. In addition, states would have no restrictions on their ability to enact differing laws imposing their own unique liability standards for "medically reviewable" health care claims. This serious flaw is certain to result in inconsistent state court decisions on what should be covered for enrollees of the same employer-sponsored health plan who reside in different states.
Federal Court Liability: The Kennedy-McCain provisions remain unchanged that would allow lawsuits over "non-medically reviewable" health claims, which are claims decisions that involve no health care judgments and are not eligible for independent external review. Lawsuits in these cases would continue to be filed in federal court for unlimited economic and non-economic damages and up to $5 million in additional punitive damages. Only liability for routine administrative duties that do not involve actions on a health care claim was eliminated from the Senate bill.
Lawsuits When Independent External Reviewers Agree with Plan's Decision: The Senate-passed Kennedy-McCain bill fails to foreclose the possibility of lawsuits even when an independent external reviewer actually agrees with the coverage decision made by a health plan. This major flaw significantly undercuts the argument made by the bill's proponents that the external review process will effectively limit liability exposure. It is entirely possible under the Senate-passed bill that a plan could still be held liable under a state law standard of care, even though an external reviewer decided that the plan's coverage decision was appropriate.
Insufficient Employer Protections: The Senate-passed Kennedy-McCain bill purports to "protect" employers from ruinous and unpredictable damage awards by allowing them to transfer their liability to an insurer or some other "designated decisionmaker" who would be responsible for making all health care claims decisions. There are numerous problems with this approach. First, it is far from clear whether all employers will be able to find "designated decisionmakers" willing to accept unlimited and unspecified liability on an employer's behalf, especially when the decisionmaker could be subject to 50 different state law standards. Second, it is absolutely clear that employers will still end up paying for the liability burdens of those willing to accept "designated decisionmaker" responsibilities and these higher costs will come on top of the double-digit increases in health premiums that employers are already facing.
The Erosion of Legal Contracts: The Senate-passed Kennedy-McCain bill did nothing to fix the provisions that allow independent external reviewers to simply ignore definitions of medical necessity and other similar terms that have been agreed to by employers and health plans for the purposes of making decisions on health care claims. In some cases, these definitions are either approved or actually required under state or federal law. Allowing independent reviewers unrestricted ability to make decisions without regard to legally-binding contractual definitions defeats the very purpose of having a contract. This flawed provision is also guaranteed to lead to inconsistent interpretations of when a particular benefit should be covered for participants enrolled in the same health plan.
Class Action Lawsuits: Under the Kennedy-McCain bill, class action lawsuits could continue to be filed under numerous provisions of both federal and state law. For example, class actions based on the Racketeer Influenced and Corrupt Organizations Act (RICO) statue would continue to be fully available. The only class actions limited under the revised Senate bill are those initiated after the date of enactment based on certain enforcement provisions of ERISA and the patient protection provisions the Senate bill.
In summary, the Senate-passed Kennedy-McCain bill remains excessively biased toward resolving issues concerning health care claims through costly lawsuits based on differing state law standards. Employers would be required to completely distance themselves from any direct involvement in health care coverage decision making to shield themselves from the extraordinary and unpredictable liability burdens this bill would impose. Even if they take this step, it is impossible for employers to escape the higher costs this legislation imposes on the coverage they offer to their employees. Finally, decisions about when a particular benefit should be provided by a health plan are certain to vary widely depending on where an individual resides because the bill fails to hold independent external reviewers or state courts to any standards in making consistent interpretations of coverage.
American Benefits Council
July 2001