You Can Sue Your Boss. You Can Even Sue the President. But Most Americans Can’t Sue Their Health Insurer. Reform is Afoot to Change That.

Time Magazine

Attorney David Goodrich held an almost religious belief in playing by the rules. Certainly his deference to protocol and respect for others were plainly evident on the day in June 1992 when, in the middle of the courtroom, he toppled flat onto his back. Coughing up blood, the prosecutor from San Bernardino County, 60 miles east of Los Angeles, apologized profusely to the court for the delay. “David stood out” for his fairness and selflessness, says his former boss John Kochis. “You felt good when you were around David.”

Shortly after his courtroom fall, Goodrich was told he had stomach cancer. It was then that he found himself launched upon a three-year ordeal of battling not just the disease that would ultimately kill him but also Aetna U.S. Health Care, the nation’s largest health insurer. As required, he first approached doctors in his plan. Conceding that they didn’t have the expertise to treat his rare form of cancer, leiomyosarcoma, they referred him to specialists outside the plan. He bounced back and forth between clinics and Aetna bureaucrats who challenged his use of out-of-plan doctors and “experimental” treatments such as the high-dose chemotherapy and cryosurgery that specialists urged. Within four months the cancer spread to his liver. He continued his maddening shuttle for two years, but his fate was sealed.

Though Goodrich died in March 1995, at age 44, Aetna insists that it had approved all the necessary treatments and acted promptly and responsibly throughout. His widow Teresa felt otherwise and sued; Aetna, she said, in effect hastened her husband’s death. In a decision with national resonance, a jury in San Bernardino County Superior Court agreed. Strenuously. In the stiffest such penalty ever imposed on an HMO, the jury two weeks ago awarded Goodrich’s estate almost $ 750,000 in compensatory damages for medical costs and $ 3.8 million for “loss of companionship and support.” In a separate decision last Wednesday, it topped those figures off with a breathtaking $ 116 million in punitive damages, concluding that Aetna had acted with fraud and malice. The jury “sent a message,” says Jamie Court, director of Consumers for Quality Care, a California-based watchdog group. Not just to the HMOs, he adds, but also to Congress, which should “pay attention to denial of rights that kills patients.”

Although the award is likely to be trimmed on appeal, its significance remains. The Goodrich family found justice where few can. Under the 1974 Employment Retirement Income Security Act, more than 125 million Americans currently covered by their employer’s HMO programs cannot sue their provider for punitive damages. It doesn’t matter if the HMO manager is a bumbling idiot or a devious scrooge. It doesn’t matter even if the patient dies or loses a limb to negligence.

Originally designed to shield employee benefit plans from frivolous but potentially crippling lawsuits, ERISA evolved over time to protect HMOs from liability suits by anyone–except Medicare and Medicaid recipients, church officials and government employees like Goodrich. Others can go to court, but at most they are entitled to recover the cost of the care that their HMO refused to reimburse. Not much consolation.

ERISA’s clear subordination to corporate interests lies near the heart of the national debate over health-care reform. In his State of the Union address, President Clinton once more pressed Congress to pass a Patients’ Bill of Rights, a crucial element of which would be the right of any consumer to hold an HMO legally accountable for its medical blunders. Such unlikely allies as consumer-advocate groups and the American Medical Association support this reform. They argue that in attempting to practice cost control, HMOs end up practicing medicine. Even judges have voiced frustration. Ruling in favor of an HMO in an Oklahoma case in which the insurer delayed a bone-marrow transplant for a woman, who later died of leukemia, a three-judge panel in the 10th U.S. Circuit Court of Appeals wrote, “Although moved by the tragic circumstances of this case and the seemingly needless loss of life…we conclude that the law gives us no choice.” Perplexed by such cases, legislators in Congress and in 27 states last year considered bills that would expose health plans to the same malpractice liabilities as doctors–but didn’t get very far.

Defenders of the current system argue, with some merit, that permitting people to sue insurers would lead to a flood of litigation, enrich lawyers, raise the cost of coverage and leave complex and emotional medical decisions to a patchwork of courts and juries. Expanding a patient’s right to sue “would probably be the most inflationary change in the history of health care,” says David Simon, Aetna‘s chief legal officer. “You’d be telling people, ‘Go sue like crazy. Make $ 89 million verdicts routine.'”

When Representative Charlie Norwood, a Georgia Republican, introduced a bill last year that would have opened the door to HMO malpractice suits, the American Association of Health Plans quickly parried with a study by the accounting firm KPMG Peat Marwick predicting that the resulting torrent of suits would pump up premiums as much as 8.6%–a claim that lost some currency when, in a similar study, the Congressional Budget Office concluded that costs would rise only 1.2%, a mere $ 7 per covered employee per year. House Republicans, led by Dennis Hastert of Illinois, now Speaker, opposed the plan largely on financial grounds, and Norwood’s proposal languished. On the state level, intense industry lobbying torpedoed one reform plan after another.

Republican control of Congress may doom hopes of federal ERISA reform anytime soon. Still, Norwood has returned with a new bill that would not only allow patients to sue but would also give them the right to appeal to the courts as soon as an HMO denies care that a doctor recommends. Norwood’s bottom line: “If you practice medicine with or without a license, you have to be responsible for your actions should you maim, harm or kill.”

Some HMOs are attempting their own limited reforms. Just a month before the Goodrich award, all HMOs in California agreed to submit to review by an outside panel of doctors. Fifteen states allow patients to appeal HMO decisions to a state board, though critics say the panels almost always side with the insurer.

Only Texas, in 1997, has passed laws allowing consumers to seek legal damages from health-care programs. Dedicated to a woman who died of a brain tumor soon after she was told her headaches were nothing more than anxiety attacks, the Texas model is serving as something of a laboratory for reformers elsewhere. The landslide of litigation that critics predicted failed to materialize. Only one malpractice suit has so far been filed. The new state review panels expected to be deluged by 4,400 appeals from unhappy patients in the first year alone, but only 280 cases were heard, and in half those the boards ruled for the HMO. Doctors in the state say HMOs seem to have become more inclined to accept suggested treatments and speed the paperwork.

All this political to-and-fro-ing doesn’t impress Goodrich’s widow Teresa much. “He was incensed by the way he was treated,” she recalls. “It offended his sense of justice.” To her, the obvious solution lies in the simple maxim that her husband lived by: Do right by people.

–Reported by James Willwerth/San Bernardino, Dick Thompson/ Washington and Hilary Hylton/Austin

BOX STORY:

WAYS TO FIX IT

While Teresa Goodrich could sue because her husband was a state employee, most consumers can’t. To make HMOs universally accountable, health-care advocates and lawmakers are pushing three possible solutions:

MALPRACTICE SUITS

UPSIDE: Revisions in existing statutes would allow all consumers to hold their HMOs legally liable.

DOWNSIDE: If significantly more suits were filed, insurers would be forced to increase premiums.

REVIEW PANELS

UPSIDE: Already in place in 15 states, these panels hear appeals of treatment rulings by health insurers–and can rule against them.

DOWNSIDE: In some places, panels have had difficulty enforcing their decisions.

NO-FAULT INSURANCE

UPSIDE: This kind of coverage could avoid the time and expense of suits and standardize awards.

DOWNSIDE: HMOs might deny expensive care in favor of paying uniform awards that would actually cost less.