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Allowing patients to sue health plans for medical malpractice would cause only a small increase in health insurance premiums, a recent study concludes.
The study's findings add some fuel to the debate in both Congress and statehouses throughout the United States, where bills have been introduced that would expose health plans to such suits. Business groups have opposed these bills on the grounds that the additional costs would be passed on to purchasers, driving up the cost of insurance.
Under current law, employees generally cannot sue a health plan for medical malpractice if it denies coverage for a treatment. Instead, employees must bring suit against a plan under the federal Employee Retirement Income Security Act, which limits any recovery to the value of the denied benefit. An exception exists, however, for state and local employees, whose benefit plans are not covered by ERISA, and people who obtain health insurance by themselves and not through their employers.
Using this exception, Coopers
& Lybrand L.L.P., in a study commissioned by the Henry J. Kaiser Family Foundation, examined three health plans for public employees and the frequency of suits against them. The Menlo Park, Calif.-based foundation, a health care philanthropy, is unrelated to Kaiser Permanente.
The study states that the three groups, California Public Employees Retirement System, the Los Angeles Unified School District and the State of Colorado Employee Benefit Plan, with a total of more than 1.1 million combined members -- CalPERS alone has about 1 million enrollees -- had litigation rates ranging from 0.3 to 1.4 cases per 100,000 enrollees per year.
It was estimated that each administrative appeal costs $10,000 to defend and each suit costs $100,000 to defend. This works out to a direct monthly cost per enrollee of $0.03 to $0.13, when combined with the costs of internal administrative appeals, the study said.
The authors noted, however, that HMOs might face higher rates of litigation than the employer plans studied.
"Because health insurers and HMOs are more actively involved in the administration of benefit plans and do not enjoy an employee/employer relationship with their members, they may be subject to greater appeal and litigation risks than plan sponsors," the study states.
The study comes at a time of greater interest in opening health plans to liability for malpractice. Bills were introduced in 30 states this year that would expose health plans to greater liability for treatment decisions. At least 23 states, though, have rejected such measures.
A federal measure backed by the House Republican leadership does not include the malpractice provision (BI, June 29). An earlier proposal by Rep. Charles Norwood, R-Ga., that would amend ERISA to allow such suits is pending, but is not expected to pass. In fact, Rep. Norwood has thrown his support to the House Republican leadership proposal.
Another aspect of litigation examined by the study was the rate of lawsuits filed by individual purchasers of insurance. One health plan that was examined experienced 9.3 lawsuits per 100,000 members per year from January 1993 to June 1996. This compares with 1.3 suits per 100,000 claimants with group coverage for the same time frame. Despite ERISA, group members sued anyway.
The authors caution, however, that this higher rate among individuals might not apply to group members if group members were permitted to sue because individuals often buy insurance under different circumstances -- for example, they may have more health care needs -- and often have more restricted policies than group members.
The study's results differ from one conducted earlier this year by Barents Group L.L.C., a unit of KPMG Peat Marwick L.L.P. That study, sponsored by the American Assn. of Health Plans, stated that the change in liability for health plans would increase premiums by between 2.7% and 8.6% (BI, May 4).
Copies of "Impact of Potential Changes to ERISA: Litigation and Appeal Experience of CalPERS, Other Large Public Employers and a Large California Health Plan" are available free by calling 800-656-4533.