The nation’s high court has unanimously ruled that workers with employer-sponsored health insurance can’t sue their health maintenance organization (HMO) in state courts when their HMO won’t cover a recommended treatment. The decision is generally being hailed as good news for employers who provide health benefits.
Individuals Claim HMO Refusals Caused Injury
In lawsuits filed in Texas state court, Juan Davila and Ruby Calad claimed they suffered injuries because their HMOs—Aetna Health Inc. and CIGNA Healthcare of Texas Inc.—refused to cover certain doctor-recommended treatments. Davila and Calad argued that the coverage denials violated a Texas Health Care Liability Act (THCLA) provision requiring health plans to exercise ordinary care when making heath-care treatment decisions.
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Aetna and Cigna asked the court to dismiss the lawsuits, arguing that the Texas health-care law is superseded by the federal Employee Retirement Income Security Act (ERISA), which regulates employer-sponsored health plans. A federal appeal court, however, sided with the employees and said the cases could go forward in the Texas courts.
ERISA Trumps State Laws
Now the U.S. Supreme Court has reversed the appeal court ruling and moved the case to federal court.1 The high court explained that ERISA trumps state laws—like the THCLA—that allow patients to sue HMOs for damages from denied coverage of recommended treatment. Thus, such lawsuits may only be brought under ERISA in federal court.
Decision May Help Control Benefits Costs
A number of states, including California, have laws similar to the THCLA, and the new decision limits employees’ rights to bring coverage-related lawsuits under these laws. The deterrent effect could translate into reduced health benefits expenses for employers. That’s because there’s a greater range of damages available under the state laws than under ERISA. Additionally, the new ruling should free up employers with offices in multiple states to design uniform health-benefit plans without worrying about how different state courts might rule if coverage disputes arise.