The Bullet-Proof HMO

How the federal government helps shield health-maintenance organizations from negligence suits

The industry was so successful last year because it harped on a single message: increased liability equals increased costs. According to HBC literature, earlier and current bills (such as Kennedy-Dingell) "would increase health-care costs for families and businesses, resulting in millions of Americans losing their health-care coverage."

It's a subtle, highly effective argument: allowing patients to sue HMOs will only benefit trial lawyers while forcing employers to jack up health-plan premiums to pay for health-care companies defending "frivolous" lawsuits. In February 1999, the HBC even provided some numbers backing their claim. The group said the Kennedy-Dingell bill would increase premiums by 8.6 percent, although that figure was unsubstantiated. Three months later, the unsubstantiated increase had dwindled—without explanation—to 6.1 percent.

In any case, the HMO industry's argument is completely baseless. A 1998 Congressional Budget Office study of HMO liability legislation found proposals like Kennedy-Dingell would add just $2 per member per month to premium costs for medium and large health plans.

But far more compelling is the fact that Texas has allowed consumers the right to sue HMOs for pain and suffering since 1997. In 1998, a study by the firm Milliman and Robertson determined the liability law cost Texas employers only 34 cents per member per month more. In addition, the Texas Department of Insurance found just 218 people sued an HMO in the law's first year—substantially less than the predicted 4,400.

But most encouraging is the growing number of Texas doctors who say the mere threat of litigation has been enough to increase HMOs' willingness to authorize procedures and medications that a year ago would have been unthinkable.

"In my view, the ERISA exemption gives HMOs the right to steal," said Metzger. "If HMOs were subject to punitive lawsuits, they'd get into line."

Today, the Silens buy their own insurance and pay their own premiums. Silen speaks frequently on behalf of the Patients' Bill of Rights. But his wife "would like to kill [the HMOs' officials] if it were legal."

Research assistance by Michael Manzo.
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