On Monday the Supreme Court handed down a decision that may at first glance appear more relevant to the bad old days of managed care. In a decision authored by Clarence Thomas, who’s never seen an old irrelevant law he didn’t like, the Supreme Court sided with health plans and limited the ability of two Texans to sue their health plans in cases when the medical decision to change a course of care was, at the very least, highly suggested by the plans’ representatives rather than the patients’ physicians. Now it is ridiculous that a 1974 law passed about pension benefits with no thought given to health care at all has become a huge part of the current debate on health care. However, given that most plans have backed off from the kind of intensive care management that this decision was about, you might think that bar the political shouting this decision is mostly irrelevant for the future of how health plans behave. Jones the Policy Wonk would disagree, suggesting that we’re going to see a much meaner version of health insurance in the future. (I have shades of John Grisham’s The Rainmaker in my head). The Wonk writes:
- If I remember my Health Law class correctly, this is a ruling with enormous policy implications–it means that insurance companies will adopt a policy of: “Deny first, ask questions later.”
This ruling says that whenever an HMO denies care, the denial falls under federal jurisdiction of the ERISA statute and not state jurisdiction, regardless of whatever laws the state has passed regulating HMOs. This is very boring. But under ERISA, judges can’t award damages; the courts can only award litigants the value of the benefit denied. This is a huge deal.
For the consumer, it means an insurer can deny your medical treatment without any fear of the consequences. For example, my family’s got a history of breast cancer and my doc says I need a mammogram. My insurer refuses to cover mammograms because they’ve got a strict policy of not covering mammograms for women under 50. I don’t get the mammogram, I get breast cancer, it’s discovered very late and they have to lop off my breasts. And I’m the world’s pre-eminent lingerie model, and I lose my job and I’m impoverished and eating dirt in the street.
My company’s liability? Under state law, they have to worry about the effects of their actions–if I can prove their breach of contract in not providing me the mammogram, they have to compensate me for the loss of my career, the pain and suffering I endured from chemotherapy and surgery, the family weddings and holidays I missed, the medical costs they didn’t cover, the dirt I had to eat, etc. But under ERISA, if they’re found guilty of breach of contract, they are liable only for the $100 value of the mammogram that they denied me.
Clearly, that’s a ludicrous example. I mean, I’m a lingerie model, I’d pay for the mammogram, right? But what if I were a janitor denied chemotherapy? Or a secretary with a rare, highly curable but very expensive disease. If you’re an insurer, wouldn’t it make sense to just let me die and take your chances with a jury? After all, worst case scenario is that you would pay out as a penalty what you would have spent anyway to treat me. And as an added bonus, I’m dead, so you don’t have to worry about paying for any other diseases I might get or any therapy I might need after I survive this treatment.
Today’s ruling is a little more complex than the papers are indicating. For example, it doesn’t apply to people buying insurance on their own, so it doesn’t apply to everyone (it just applies to most people, who get their insurance from large self-insured companies). But clearly, today’s ruling creates yet another perverse incentive in our health care system. Insurance companies are now actively incentivized to deny medical treatment because there’s no downside to denying care. In addition, they’ve got an incentive to lie to their customers, promising benefits to get people to enroll that they have no intention of ever delivering. Because there’s no penalty for not keeping their promises.
You can’t really blame the Supremes for this–it’s a proper interpretation of the law as written. And Congress should definitely amend ERISA. But this is what you get when you make medical care an employment benefit. It’s patently ludicrous to pretend that medical care is a pure economic good, like cash in a pension plan, and it says volumes about our understanding of health care that we could ever write a law saying so.