Senate Panel OKs Bill on HMO Liability

SACRAMENTO —  A state Senate committee approved a bill Tuesday that would hold health maintenance organizations liable for interfering in the quality of care provided to 14 million Californians.

The action dealt a substantial setback to the managed care industry, insurance companies and employer organizations, which had teamed up with former Gov. Pete Wilson to successfully beat down previous efforts to expand patients’ ability to sue.

It also heartened supporters of the bill, who voiced hope that it would find a favorable reception from Gov. Gray Davis. During his election campaign, Davis said he favored expanding patients’ rights to sue their HMOs when they are harmed.

Last year, a similar bill died in the Assembly in a battle that pitted health care plans and the insurance industry against trial lawyers, nurses and consumer advocates.

On Tuesday, state Sen. Liz Figueroa (D-Fremont) conceded that Davis has not committed himself to supporting her bill, but told reporters, “We’ve been getting some very positive signals from the Davis administration and from the governor himself.”

Under current law, Californians enrolled in employer-paid health care plans can sue HMOs and insurers for the cost of a service, but not for punitive damages that may result from care being delayed or denied.

Backers of the Figueroa bill, SB 21, charged that the managed care industry is the only enterprise in California that is immune from liability for actions that may damage the 14 million or so citizens whose health coverage is provided by private employers.

The right to sue for punitive damages in California, however, is provided by federal law to an estimated 9 million government employees, Medicare recipients and individuals who purchase their own health insurance. Proponents of the Figueroa bill say simple fairness demands that everyone be treated the same.

Supporters contended that if HMOs were held legally accountable for quality-of-care decisions, they would pay greater attention to patient welfare and focus less on cost-cutting.

“The point is to ask HMOs to behave responsibly” and if they do not comply, “we have a big stick in the closet,” said Jamie Court of the Santa Monica-based Consumers for Quality Care.

He told the committee that the California bill is modeled on a Texas law adopted two years ago under Gov. George W. Bush. Since then, he said, only one lawsuit has been filed in that state.

Opponents of the bill, including the California Chamber of Commerce, California Manufacturers Assn. and the California Assn. of Health Plans, warned that increasing the exposure of managed care operators to liability lawsuits would drive up the cost of health care and could cause employers to cut back coverage.

As an alternative, opponents suggested that California concentrate harder on developing a system in which patients’ grievances against their HMOs could be worked out in an arrangement involving reviews by outside medical experts.

“Do we want . . . people to lose their health benefits or do we want lawyers to make more money?” asked state Sen. Ray Haynes (R-Riverside), who voted against the bill.

After the hearing, Maureen O’Haren, a vice president of the California Assn. of Health Plans, told reporters she had anticipated that the committee would approve the bill and conceded it would probably reach Davis’ desk.

She said segments of the managed care industry would turn their attention to trying to set limits on the size of damage awards. “Putting limits in would make the bill better,” O’Haren said.