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Blood products makers win final approval of settlement

CHICAGO-A federal judge in Chicago gave final approval to a settlement ending the class-action suit over HIV-tainted blood products.

Judge John F. Grady of the U.S. District Court in Chicago signed the accord after the four corporate defendants agreed to pay more than $12 million to the federal government as reimbursement for the health care costs incurred to treat hemophiliacs who contracted HIV from their blood-clotting products.

The settlement reached last year calls for a payment of $100,000 to each of the approximately 6,000 claimants (BI, Aug. 19, 1996). A few hundred other members of the class-action suit have opted out of the settlement and are free to pursue individual litigation.

In addition to paying the federal government, the four defendants-Baxter Healthcare Corp.; Bayer Corp., a unit of Bayer A.G.; The Armour Pharmaceutical Co., a unit of Rhone-Poulenc Rorer Inc.; and the Alpha Therapeutic Corp., a unit of the Green Cross Corp. of Japan-also have agreed to reimburse private health insurers and state governments. The total reimbursement will exceed $30 million. The four companies will divide the payments based on their market share for the product, with Bayer's 40% share the largest.

The final hurdle to the settlement was reaching an agreement on reimbursing the federal and state governments for their costs of treating the plaintiffs under Medicare, Medicaid, health plans offered by the Department of Veterans Affairs and Defense, the Indian Health Service program and the Federal Employees Health Benefits Program.

Appeals to the settlement can be filed for 30 days. If that period passes without an appeal, the companies will start making payments 30 days later, in early July.

NCQA expands accreditation

WASHINGTON-The watchdog organization that accredits and grades managed care organizations will offer virtually the same service to physician hospital organizations and integrated delivery systems.

The Washington-based National Committee for Quality Assurance said last week it would start accrediting these groups directly. Previously, the NCQA asked health maintenance organizations to evaluate the physician groups as part of their own accreditation process.

The NCQA will judge the physician-owned organizations on the same six basic criteria it uses to certify other managed care organizations: quality management and improvement; utilization management; credentialing and recredentialing; preventive health; members' rights and responsibilities; and medical records.

The program is supposed to ease the burden on health plans that contract with physician organizations and that now must conduct annual onsite audits to obtain NCQA accreditation. Health plans using physician organizations also will be allowed to be evaluated in as many of the six basic categories as they wish.

Colorado comp bills vetoed

DENVER-Two workers compensation bills in Colorado that would have severely restricted benefits for emotional stress claims have been vetoed by Gov. Roy Romer.

S.B. 140 would have reduced benefits to injured workers with mental impairments by as much as 48% while S.B. 139 would have prohibited combining a scheduled injury with mental or emotional stress to get a whole-person rating.

The American Insurance Assn., which lobbied for passage of the two measures, said they are needed to eliminate problems created by 1991 workers comp reforms, which made it easier for workers to file stress claims. The AIA said courts have been interpreting the 1991 statute liberally, leading to increased litigation and reducing return-to-work incentives.

But Gov. Romer countered that the 1991 reforms have helped curb runaway costs while maintaining benefits to injured workers.

"Since passage of this legislation, workers compensation premiums have dropped 27% from fifth-highest in the country to 30th. We also have benefits in the Top 10 as compared to other states," Gov. Romer said in a letter to the Legislature. "This reform is working."

Gov. Romer also pointed out that neither of the bills was reviewed by the workers compensation review group he appointed last year to analyze proposed changes. He said he will ask the group to reconvene to develop more workable reforms.

"I recognize that there may still be inequities in the overall manner in which we figure benefits. However, this legislation does not address them in a realistic way. If we are going to tackle these problems, we must do so in a balanced fashion," the governor said.

Court upholds Tailhook award

SAN FRANCISCO-Hilton Hotels Corp. said last week that the company is disappointed and exploring its options after a federal appeals court upheld a multimillion dollar jury verdict favoring Tailhook whistleblower Paula Coughlin.

The 9th U.S. Circuit Court of Appeals ruled 3-0 on May 2 that there is sufficient evidence supporting the contention that the Las Vegas Hilton and its parent company "showed a conscious disregard for the safety of others." The court rejected Hilton's claim that it was entitled to a new trial because a juror had been dishonest during jury selection.

Ms. Coughlin was a Navy lieutenant and decorated helicopter pilot who was attacked, grabbed and groped by drunken aviators during the 1991 Tailhook Assn. convention, according to court records. She suffered post-traumatic stress syndrome and left the Navy.

Ms. Coughlin settled a lawsuit against the association for $400,000. In 1994, a federal court jury ordered the Las Vegas Hilton and its parent to pay her $6.7 million in compensatory and punitive damages. But a U.S. district judge reduced damages by $400,000 to account for the settlement with the Tailhook Assn. The judge also reduced the award by another $1.1 million because Nevada law limits punitive damages to three times compensatory damages.

The appeals court also considered a cross appeal filed by Ms. Coughlin and asked Nevada's Supreme Court to resolve a legal issue that could restore the $1.1 million.

Suit against gun maker dismissed

SAN FRANCISCO-A San Francisco superior court judge last week dismissed a lawsuit against Miami-based Navegar Inc., the maker of assault weapons used in a 1993 massacre that left eight people dead and six others wounded at a San Francisco law firm.

Judge James Warren's action scuttled attempts to hold the manufacturer liable for the criminal use of a non-defective product that was legally made and marketed.

The lawsuit, filed in 1994, was a unique effort to use a product liability lawsuit on behalf of violence victims (BI, June 20, 1994). The plaintiffs claimed the nature of the firearm itself creates liability when used in a crime.

Because of the unique character of the lawsuit, gun makers and other manufacturers feared it would open the door to new suits.

Two years ago, Judge Warren ruled that the victims and their survivors could try to prove that the guns used in the massacre were designed and marketed for mass killing, making them an "ultra hazard." That decision has been cited by plaintiffs attorneys in other cases, said Ernest Getto, a Los Angeles partner at Latham & Watkins who represents Navegar.

But last week the judge said the manufacturing or marketing of a gun is not an ultra hazard. An ultra hazard activity gives rise to strict liability.

The judge also said there was not enough evidence to hold Navegar responsible and that the plaintiffs lacked evidence linking the killer's actions to Navegar's advertisements, according to Mr. Getto.

Golden Eagle penalized heavily

SAN FRANCISCO-Golden Eagle Insurance Co. and a related company received more than 10% of the total penalties assessed against workers compensation claims administrators in 1996 by the Division of Workers Compensation's Audit Unit.

The San Diego-based insurer, which is in conservation pending its sale to American International Group Inc. of New York, was assessed 788 penalties totaling $116,975 for improperly handling workers compensation claims during 1996.

In addition, 204 penalties totaling $26,175 were assessed against a related company, Big Bear Markets. Big Bear, also based in San Diego, is a self-administered, self-insured employer whose claims are handled at the same location by the same claims staff.

The penalties against Golden Eagle and Big Bear represent more than 10% of the 9,030 penalty assessments totaling $1,164,120 the division levied against workers compensation claims administrators during 1996.

The penalties against Golden Eagle also were the most ever assessed in a single audit, according to DWC's 1996 Annual Report to the Legislature on its audit activities.

When asked to comment on the fines, Karl Rubinstein, deputy conservator and chief executive officer of Golden Eagle, said, "It's not surprising." Mr. Rubinstein was appointed by Insurance Commissioner Chuck Quackenbush to oversee the conservation of the insurer after it was seized by the Insurance Department Jan. 31.

John Mabee, Golden Eagle's former president and the current president of Big Bear Markets, did not return phone calls.

Responding to the report's overall findings, DWC Administrative Director Casey L. Young said: "The statistics.*. *.paint a troubling picture. Auditors are continuing to find the same problems of unacceptably high amounts of unpaid compensation due, late payment of benefits, and failure to notify employees of their rights to benefits in a timely matter."

"Overall, the workers compensation claims administration industry has not significantly improved its performance since last year," he said.

Briefly noted

The Alabama Supreme Court has dramatically reduced the punitive damages awarded a doctor who was not informed the paint on his new BMW had been damaged in transit and subsequently touched up. Ruling last year in the case of BMW of North America Inc. vs. Ira Gore Jr., the U.S. Supreme Court held that a $2 million punitive damage award was unconstitutionally excessive, sending the case back to the Alabama high court, which on Friday cut the award to $50,000. . . .A federal district judge in Tacoma, Wash., ruled last week that a state law requiring employer-sponsored health plans to provide beneficiaries with all categories of providers-including acupuncturists and naturopaths-is pre-empted by the federal Employee Retirement Income Security Act. The ruling follows a lawsuit filed by 12 insurers (BI , April 22, 1996). . . .Small employers that miss quarterly required contributions to their pension plans will only have to file one notice to the Pension Benefit Guaranty Corp. covering all missed payments rather than within 30 days after each payment's due date. The notice would be filed by the due date for payment of PBGC premiums. The regulatory relief applies to missed contributions due after Jan. 1. . . .Charles (Chick) Kwasha, 90, who founded the employee benefit consulting firm Kwasha Lipton in 1944, died last week in North Miami, Fla. . . .Voting members of Seattle-based Group Health Cooperative of Puget Sound have approved a proposal to affiliate with Kaiser Permanente (BI, Dec. 23, 1996). As a result of the vote, a non-profit organization called Kaiser/Group Health will be formed to oversee many administrative functions of Group Health Cooperative, its eastern Washington affiliate, Group Health Northwest, and Kaiser Permanente in the Northwest, making up an expanded Northwest Division of Kaiser Permanente that will serve more than 1 million people. . . .The 6th U.S. Circuit Court of Appeals upheld its 1996 decision that lawsuits against silicone breast implant maker Dow Corning Inc. and its parent companies-Dow Chemical Co. and Corning Inc.-be consolidated in federal bankruptcy court in Michigan. The appeals court ruling will affect about 10,000 cases pending in state and federal courts nationwide.