What if You Could Sue Your HMO? Managed Care Liability Beyond the ERISA Shield

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The legal environment that afforded managed care organizations protection from liability for harm resulting from their cost containment activities has shifted and the risk of liability under state law has increased. This article combines conventional legal analysis with empirical findings from a large number of confidential interviews with experienced health care lawyers, health plan managers, and industry observers to explain why managed care liability has been low and why it is increasing. It also analyzes liability statutes enacted by the states and proposed by Congress to describe their differing scopes and standards of liability. The article then addresses the costs and benefits of enhanced liability of managed care organizations to develop a framework for the adjudication of lawsuits challenging the clinically based actions taken by managed care organizations. The authors conclude that a medical professional standard should govern vicarious liability claims that seek to hold health insurers responsible for the quality of care rendered by their physician agents and that a process standard should govern claims that challenge managed care organizations' clinically based coverage determinations. In cases seeking personal injury damages for wrongful coverage determinations, the principal focus should be whether the managed care organization had an acceptable system in place, and followed it, for making reasonable assessments of clinical factors that determine what the insurance policy covers.

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