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ASHRM: PLANS RELY ON ERISA SHIELD

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ATLANTA-With state legislatures responding to increased consumer concern over managed care, federal protection for health care benefit plans will become even more important, an attorney says.

The Employee Retirement Income Security Act of 1974's pre-emption of state laws that relate to benefit plans and the accompanying protection from state common law claims can be especially important to managed care organizations seeking to minimize their liability for providing care to participants in employee benefit plans, said David E. Manoogian, a senior partner with Epstein, Becker & Green in Washington.

"The focus of activity is now clearly at the state level, which makes the ERISA defense very useful to make sure these wily state rascals don't do anything that's contrary to federal law," Mr. Manoogian said during a managed care forum at the American Society for Healthcare Risk Management's annual conference last month in Atlanta.

More than 1,000 managed care-related bills were filed in state legislatures across the country during this year, noted Florida state Sen. Kenneth C. Jenne, D-Fort Lauderdale, who also is general counsel to the North Broward Hospital District in Fort Lauderdale.

"The Supreme Court is going to and has restricted ERISA pre-emptions, but for us in the managed care industry it is still tremendously useful," Mr. Manoogian said. In the ERISA pre-emption cases it has considered, the U.S. Supreme Court has allowed states to regulate managed care organizations, particularly through taxing statutes, the attorney said.

"The Supreme Court has said that if there are taxing statutes imposed by the states, then statutes can be applied to managed care organizations even if they affect an ERISA plan," Mr. Manoogian said.

But the court has not rejected the ERISA pre-emption, and Mr. Manoogian suggested he believes the court has made deliberate efforts to show that while the pre-emption might need further analysis, it is by no means dead.

"Don't let your defense attorney tell you pre-emption is dead," he said. "It's not. It's changed."

Mr. Manoogian noted that some defendants and insurers don't want to spend the money associated with mounting an ERISA defense to a managed care claim, but despite the cost, he believes it's essential to make vigorous use of the defense.

"In cases where ERISA applies, it is by far the best protection you have," Mr. Manoogian told health care risk managers. "You want to use ERISA every chance you can, as vigorously as you can."

But Carl Taylor, vp of business development for the North Broward Hospital District, said, "With all due respect to the ERISA pre-emption, the plaintiffs lawyers in my state and yours want to find ways to bring managed care organizations to the table."

For that reason, said James M. Fasone, vp of corporate risk management at MedPartners Inc. in Birmingham, Ala., health care risk managers must anticipate the coverage and exposure implications associated with the managed care legislation under consideration in their states.

"The fact is, laws are going to change, and there are going to be attorneys out there that find ways to sue you," Mr. Fasone said.

He suggested that health care risk managers work closely with their organizations' legal departments, peers and organizations such as ASHRM to determine some of the implications of regulatory change. They also should challenge their brokers and underwriters to provide relevant technical information.

Sen. Jenne noted that until recently, legislative interest in health care has focused on economics rather than quality. Health maintenance organization legislation in the early 1970s resulted from constituent demand, he said, adding, "the real reason was large corporations were finding that more and more of their budgets were contained in health care matters."

"When it came to health care, a lot of constituents, a lot of businesses, felt that a very few people were making a lot of money," the Florida state senator said.

The legislation passed at that time did achieve a positive result in that health care costs were held down. "The problem was. . .a lot of things occurred that were never predicted," Sen. Jenne said.

Now consumers think their access to health care is being restricted while they're paying increasingly higher shares of the cost for care, Sen. Jenne said.

In recent years, employers have shifted a greater amount of the cost for health plans to employees, he said, making for a different attitude from consumers when they walk into an HMO.

"And it means as risk managers, in my opinion, that you're going to see more pressure on your facilities than ever before," the Florida legislator said.

That attitude is also being reflected in the new wave of managed care legislation.

"When legislative change occurs, there's got to be a constituent change," Sen. Jenne said. "And there is a constituent change."

Legislation emphasizing individual consumer rights and curbing perceived abuses of managed care plans is seen as good public policy. Patient satisfaction, measurable outcomes and greater freedom in the relationships between patients and physicians are common characteristics of the newest round of managed care legislation.

There will be more pressure for open referrals, a trend to which many plans are already responding, and there will be more widespread availability of data related to managed care plans.

Sen. Jenne noted that there is pressure to allow many "good exceptions" to the original cost-controlling aspects of managed care. "Every time one of these good exceptions takes place, it ups the price a wee bit," he said. "It's the collective situation that's going to put us back into a situation that's going to be very difficult."

But, unlike in the past when cost was the key legislative consideration, said Peter C. Robinson, president and chief executive officer of Aon Managed Care Inc. in San Francisco, "Quality is clearly the new driver."