Part 4 -- Legislating MCO Accountability

All fifty states have laws protecting patients from corporate negligence that results in harm to the patient. Unfortunately, the federal ERISA loophole eviscerates these state protections in regard to ERISA-covered health plans. While judicial review is beginning to hold managed care organizations (MCOs) responsible for malpractice in the administration of ERISA-covered health plans, changes in public policy can have the same effect. Effective revision of state and federal public policy can resolve the unintended consequence of ERISA in shielding MCOs from malpractice claims.

Changes in state negligence laws can provide relief from the unintended ERISA loophole. At least thirteen states, including Maryland, have passed laws prohibiting "hold harmless" clauses that many health care providers sign with MCOs. In a hold harmless clause, only a health care provider can be held liable for the result of treatment, even if treatment was determined by an MCO decision consistent with MCO practice guidelines. Several states have passed laws mandating external grievance and appeal for MCO decisions regarding client health care, including Maryland and Texas. While states have considered various mechanisms for the grievance and review process, the Texas approach has been tested in federal court and struck down. Other state’s laws regarding external grievance and appeal may face similar tests.

Several states have revised negligence law that formerly permitted MCOs to use the defense of "corporate practice of medicine doctrine" against negligence claims. This doctrine provides that only licensed health care providers practice medicine; corporations can not practice medicine. A Missouri accountability law, House Bill 335, began taking effect on August 28, 1997. This act made MCOs subject to malpractice laws, bearing responsibility for how decisions affect outcomes. While the Missouri law eliminates the corporate practice of medicine defense, it fails to establish a standard of care applicable to the actions of an MCO, leaving that task to interpretation by the state courts. Subsequent to enactment, no claims of negligence have been filed against a Missouri MCO. Texas enacted an MCO accountability law, Senate Bill 386, on September 1, 1997. In contrast to the Missouri act, this act expressly applies a uniform standard of care to individual health care providers and MCO decisions about treatment. This part of the Texas legislation has been tested and upheld in federal court. This Texas law has now led to two malpractice lawsuits filed against MCOs, including the claim mentioned in Part 3 of this series. Even if a state’s grievance and appeal process is invalidated in federal court, a uniform standard of care, applied equally to psychologists and MCOs, can hold MCOs accountable for their treatment decisions.

Federal legislative changes can also resolve the ERISA problem. Bills to accomplish this task have been introduced in previous congressional sessions, including the following two bills:

a) Patient Access to Responsible Care Act (PARCA) - HR 1415 (Norwood, R-GA) and S.644 (D’Amato, R-NY). PARCA would have ended ERISA’s preemption of state remedies for personal injury and wrongful death against agents and employees of an ERISA plan, while employers would be exempted from liability, and;

b) Employee Health Insurance Accountability Act - S.1136 (Durbin, D-IL). Stronger than PARCA, this act would have prevented ERISA from invalidating, impairing, or superseding any cause of action under state law.

In summary, psychologists must be especially careful to protect themselves against malpractice claims when working with high-risk clients in a managed care environment. While the MCO remains substantially protected against a malpractice claim, the individual psychologist is not. A different standard of care may apply to an individual psychologist’s interactions with the client, which can increase the risk for the psychologist who strictly follows the MCO practice guidelines. To remedy this inequity, psychologists can pursue several avenues of relief. First, psychologists can support efforts by their state associations to facilitate the judicial review of promising claims by clients against MCOs. Second, psychologists can support lobbying efforts by their state and national associations for effective reform of state negligence law, which includes a uniform standard of care in state negligence law, and effective reform of the federal ERISA law.

The following article may prove informative for understanding ERISA remedies--

• Rooney, Curtis D. (1998). The states, congress, or the courts: Who will be the first to reform ERISA remedies? Annuals of Health Law, 7, pp. 73-100.

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