July 28, 2001 - Arizona Patients' Right Unused; Lawyers Don't Foresee Any Rush To Sue HMOs

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The new Arizona law that came into effect on January 1, 2000 that allows patients to appeal to an independent panel when their HMO denies them treatment is not likely to produce a flood of litigation, though patients may now sue for pain, suffering and punitive damages. Eight other states have passed similar laws and more than 20 others are looking at similar legislation.

In the past, patients who felt wronged could sue, but even if they won, they could collect only the cost of the denied service, typically a few hundred or few thousand dollars. Now, with the ability to collect punitive damages, awards are unlimited. Although the patients' rights bills are new, HMOs always have been liable for malpractice.

Attorneys who represent patients say they don't expect a series of suits. "The floodgates opened, and the three drops that came out didn't satisfy anyone's thirst," said one attorney who helped draft Arizona's legislation. Other Arizona attorneys believe that the lack of action in Arizona is partly due to the newness of the law.

Attorneys for HMOs said it was too early to gauge the effect of Arizona's legislation because the legal system is just gearing up. "They're creating legal strategies," said Geoff Freeman, deputy director of public affairs for the American Association of Health Plans, based in Washington, D.C., which represents more than 1,000 managed health plans. "This is a new type of product liability. Law schools will start teaching how to use this law."

The ability to collect more in punitive damages inevitably will spur more lawsuits, said John West, a Phoenix attorney who represents four of the major HMOs in Arizona. "Contrary to everyone's perception that these are deep-pocket companies with lots of money, the reality is that they are already under pressure because of increasing costs of health care," West said. "An increase in premiums is a legitimate issue being raised." Others believe the issue is not the lawsuits, but the deterrent effect of the law, since nobody wants to lower costs by allowing companies to rip people off: "If your case is too expensive, and they don't pay your claim and you don't have any recourse, then you don't really have insurance. It's more the illusion of insurance than actually having insurance," one attorney stated.

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