Did you know that, if your job-based HMO wrongly denies you coverage for a medical treatment, and that denial leads to your injury or death, federal law may protect that insurer from paying any damages to you or your family?
Did you know that the House Democrats’ health-care “reform” bill would cement this extraordinary legal immunity for the health insurance companies?
Despite the crusading anti-HMO rhetoric coming from the White House and some congressional Democrats this summer, the “reform” bills currently on Capitol Hill include many gifts to health insurers: The bills would all subsidize private insurance and mandate that individuals carry insurance; some also mandate employers insure their workers.
But Commerce Committee Republican Rep. John Shadegg of Arizona objected during the bill’s markup to another provision that benefits insurers at the expense of patients–namely, one that explicitly preserves insurers’ immunity when they harm patients by wrongly denying care.
HR 3200, the House “reform” bill, creates a “Health Insurance Exchange”–or heavily regulated markets in which individuals may buy insurance, without going through their employers. Section 151(a) of the bill includes some legislative language about plans “not offered through the Health Insurance Exchange”–which largely means employer-provided health insurance.
Paragraph 1 of the section states that all of the bill’s regulations and restrictions on the insurer do not supersede current regulations of health care. Paragraph 2 states “Nothing in paragraph (1) shall be construed as affecting the application of section 514 of the Employee Retirement Income Security Act of 1974.”
What does that mean?
ERISA was the federal law that built upon the employer-based health insurance system that currently dominates today’s insurance market. Section 514 of the law made it clear that ERISA’s rules superseded state insurance regulations. In effect, states would regulate individually purchased insurance plans and Washington would regulate most employer-based health plans.
Touted as a consumer-protection regulation, ERISA had particularly perverse consequence that came to light when Florence Corcoran’s unborn child died in 1989.
A doctor had determined that Mrs. Corcoran should be placed on bed rest in a hospital, with around-the-clock fetal monitoring because of medical problems that made hers a “high risk pregnancy.”
Nine days after entering the hospital, Mrs. Corcoran left, after learning that UnitedHealth had denied coverage of her hospital stay. Two weeks later, her child went into distress and died. The Corcorans filed a wrongful death suit in Louisiana, claiming UnitedHealth’s negligence led to their child’s death.
But federal courts ruled that it didn’t matter if UnitedHealth caused the baby’s death–state courts had no jurisdiction over ERISA plans. Further, federal courts ruled that ERISA plans could only be sued under the rules specifically laid out in the 1974 ERISA law.
That law didn’t include any avenue for victims of HMO negligence to recover compensatory damages–such as cash compensating for wrongful death. Courts have consistently reached this conclusion in similar cases.
In short, this federal law immunized the health insurers whose denial of coverage causes harm or death. And now the House reform bill appears explicitly to preserve that immunity for employer-based plans.
Shadegg tried to strike this provision in the Commerce Committee markup last month. Chairman Henry Waxman, D-Calif, expressed sympathy for Shadegg’s argument, but turned the amendment away on the grounds that ERISA was not under the committee’s jurisdiction.
But Shadegg thinks this provision is an intentional sop to the HMOs in exchange for their backing new regulations on insurers. “I think they have an agreement with Mr. Waxman and with other Democrat proponents of the House bill that–at least for employer-sponsored plans–their immunity will continue.”
Waxman’s office did not return a phone call asking about the provision. Waxman is in second place among House members for money from HMO political action committees according to the Center for Responsive Politics.
The ERISA-immunity preservation might just be another negotiating point in the backroom dealings between Big Pharma and Big Insurance on one hand and Democratic “reformers” on the other hand. Or it could just be an oversight. Or Shadegg could be misreading the law.
In any event, ERISA immunity highlights another relevant lesson for “reformers” and their backers: laws passed under the banner of protecting consumers and regulating industry typically end up helping industry and hurting consumers and smaller businesses.
Increasingly, this health-care “reform” is looking like good news for the HMOs and bad news for the rest of us.
Timothy P. Carney is The Washington Examiner’s Lobbying Editor. His K Street column appears on Wednesdays.
