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ATLANTA-Few risk managers seem aware of growing liability exposures they face in connection with their managed care programs, but that situation will change over the next few years.
The session on managed care liability issues facing employers at last week's Risk & Insurance Management Society Inc. conference was sparsely attended. But federal court rulings eroding the protections from claims stemming from benefit plans that employers have enjoyed under the Employee Retirement Income Security Act of 1974, and litigation that's sure to follow, is bound to increase attendance on discussions of the topic at future meetings, the speakers suggested.
"We've been able as employers to perhaps stand back and say we don't have responsibility for the providers we engage," said Richard S. Betterley, president of Sterling, Mass.-based Betterley Risk Consultants Inc. and the session's coordinator. "All of a sudden we have a new exposure and we probably should risk manage that."
"This is a subject that probably needs a little more attention than it's getting," allowed Mark N. Altieri, corporate risk manager for the Providence Journal Co. in Providence, R.I., the session's moderator. "Because whenever the Supreme Court sets a precedent it usually means there's a lot more stuff coming down the pike, especially in the benefits area."
Another panelist, Alden J. Bianchi, a partner with the Mirick, O'Connell, DeMallie & Lougee law firm in Worcester, Mass., outlined the history of ERISA and the federal court rulings that have interpreted it.
Those rulings first established that provisions pre-empting state and local laws related to benefit plans protected employers from state common law claims stemming from their managed care plans. More recently, however, some federal court rulings have held that no such protection exists for certain claims.
The sense of security employers have taken in the ERISA pre-emption is a false one, Mr. Bianchi suggested, as that extension of the pre-emption provision clearly was never the intent of Congress, which in passing ERISA intended to protect plan participants and beneficiaries.
"The courts are beginning to drive a wedge into ERISA by saying that common law actions or actions on medical malpractice should be allowed under ERISA," he said.
The potential exposures employers could face in connection with their managed care plans include marketing liability based on claims like "We have the best doctors" made in the advertising and marketing materials used by the providers the employers engage.
"To the extent that a person relies on that representation and marketing material to choose an HMO as opposed to another HMO. . .is there liability there? There certainly is," Mr. Bianchi said.
Gatekeeper liability resulting from directing employees to physicians who commit malpractice is another potential exposure employers face from managed care. Another area of concern is cost containment liability, an exposure employers could face if, for example, it's shown that a physician's actions are driven by a financial incentive not to perform a certain procedure and the failure to perform that procedure harms the patient, he said.
A further possible exposure stems from last year's U.S. Supreme Court ruling in the case of Varity Corp. vs. Charles Howe et al., which could open the door to employees suing employers on the basis of breach of fiduciary duty in connection with the denial of benefit claims (BI, March 25), Mr. Bianchi said.
In examining the way employers deal with their managed care plans, the attorney said he sees some recurring problems.
For one, he said, "Employers are notoriously bad at complying with the ERISA written plan requirements." And many employers are falling short in the area of filing annual plan reports, particularly with regard to cafeteria benefit plans.
He suggested employers should adopt and review plan documents, then make sure their summary plan descriptions conform with those plan documents. They also need to designate plan spokespeople and adopt, review and revise claims procedures, Mr. Bianchi said.
"Take your claims procedure very seriously," he said. "They are probably one of your better defenses against liability."
He also suggested employers might want to outsource claims processing. That distance can be significant if claim denials add to the company's exposures, Mr. Bianchi said.
Employers also should discuss the issue with their insurance advisers, he said. "These are risks that can be managed."
But Mr. Betterley suggested the exposures can't be entirely eliminated, and employers need to look for ways to transfer risks they can't avoid.
"I'm convinced that this is an exposure that we probably can't manage our way out of," he said. "We can do a lot to control it, but we probably can't make this exposure go away."
But existing comprehensive general liability policies probably wouldn't cover such claims, he said. CGL policies cover occurrences, and E&O allegations aren't considered occurrences under a CGL basic form policy. And CGL policies and fiduciary liability employee benefit endorsements cover errors in administration, but exclude claims of liability for bodily injury.
There are a handful of insurers now offering specialized policies that address "personal injury as a result of an alleged act, error or omission in the performance of professional services rendered or that should have been rendered as a purchaser of health care services," Mr. Betterley said. Mr. Betterley said he has seen the claims-made coverage offering limits of $15 million per claim and aggregate, with a minimum premium of $3,500 for $1 million in coverage.
Still, very few risk managers are purchasing the coverage, he said. And few brokers seem to be aware of the exposure, which he conceded was remote for now, but based on recent court activity, may well change.