ÿTHE WAKE-UP BOMBÿÿ
HUMAN RESOURCE EXECUTIVE
ÿÿÿÿÿÿÿÿÿÿÿÿ SPECIAL REPORT: HEALTH & INSURANCE
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿÿ THE WAKE-UP BOMBÿÿÿ
ÿÿÿ loceycahill.com;
ÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿ Emerging liabilities in managed care could prove
ÿÿÿÿÿÿÿÿÿÿÿ explosive for employers with the onset of legal and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ legislative trends.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ BY BARBARA A. MORRIS
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿ An "Eye On America" segment that aired
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ recently on CBSÿÿÿ ÿÿÿÿ explored a disturbing
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ trend which the program identified as
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ becoming more prominent among HMOs.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The segment, titledÿÿÿÿ ÿÿÿ "The Bait and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Switch," charged that some HMOs are
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ promising their customers more than they
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ can afford to deliver - and then
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ eliminating benefits, revoking certain
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ hospitals and providers, and raising
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ premiums as soon as the enrollment
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ period closes.ÿÿÿ ÿÿÿÿ It seemed to reflect the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ negative public sentiment against
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ managed care organizations (MCOs) that
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ is growing stronger every day.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ And while this sentiment is already
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ prompting increased litigation against
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ MCOs,ÿÿÿÿ ÿÿÿ experts warn it is the employer,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ who for the most part has remained a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ distant and removed party, that will likely
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ be drawn into the fray.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿ "Liability in health care is becoming very
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ broad,"ÿÿÿ ÿÿÿÿ observes Peter Van Loon, a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ principal at Pandion Risk Management,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the Simsbury, Conn.-based health -care
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ risk management consultants. While the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ provider may be the target of the initial target the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ lawyer sets in his sights,ÿÿÿ ÿÿÿÿ that target is
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ rapidly expanding,ÿÿÿ ÿÿÿÿ he says.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿÿ "Whoever has the biggest set of pockets -
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ whoever has the most money - is the one
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ who will get sued,"ÿÿÿÿ ÿÿÿ Van Loon predicts.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿ "Litigation increasingly involves a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ multidirectional buckshot approach.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Anyone remotely related to the underlying
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ cause could be brought in [to the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ litigation]," he adds.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ A recently released study by CNA Health
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Pro in Chicago, which provides insurance
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ for managed care companies, supports
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Van Loon's point. Although the study,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ titled "Understanding the Impact of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Managed Care Liability (Phase II),"
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ focused exclusively on the liability issues
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ facing MCOs, a telling result does not
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ bode well for employers.ÿÿÿ ÿÿÿÿ It indicated that
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ MCOs are becoming increasingly
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ vulnerable to litigation arising out of the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ actions of parties with whom they have
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ contractual relationships.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ In fact,ÿÿÿÿ ÿÿÿ vicarious liability,ÿÿÿ ÿÿÿÿ which can be
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ alleged against an MCO as a result of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ negligence on the part of an employed or
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ contracted provider, was among the four
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ allegations representing the largest
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ liability expenses facing MCOs today,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ according to the study. Wrongful denial of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ benefits/utilization reviews, credentialing
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and bad faith/breach of contract were
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ also mentioned, but vicarious liability
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ topped the list when measured for
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ severity.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Managed care experts also observe that
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿ health-care litigation scenarios are
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ broadening to involve not only the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ provider, but other related parties such as
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the hospital, pharmacists, plan
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ administrators, and increasingly, the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ MCO.ÿÿÿ ÿÿÿÿ In response, many MCOs are
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ attempting to shore up their liability
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ defenses.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ Bruce Dmytrow,ÿÿÿ ÿÿÿÿ senior vice president of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ risk management services at Praeventus, a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ business unit of CNA Health Pro, saysÿÿÿ ÿÿÿÿ his
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ company helps its MCO clients to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ achieve this goal through a variety of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ strategies.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ They includeÿÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ - purchasing insurance
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ products that target specific MCO
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ exposures;
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ -establishing tighter contracts
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ with providers that clearly define the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ responsibilities each party assumes;
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ -andÿ fostering improved communication
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ between the utilization and quality
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ management areas of the organization.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ But this question remains: If the tentacles
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ of health-care litigation are pulling in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ growing numbers of MCOs under an
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ expanding array of legal theories, what's
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ to stop them from moving on to the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employer? Nothing, say legal experts.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ In fact, legislative trends and legal
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿ decisions are pointing to employers'
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ eventual liability for poor medical
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ outcomes.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Sheryl Willert, managing director at the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Seattle-based law firm of Williams,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Kastner & Gibbs, says the last few years
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ have seen the emergence of numerous
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ proposed managed care bills which
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ address a variety of issues under the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ broader umbrella of consumer protections
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ or consumer bill of rights.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿÿÿ "There is clearly a political movement
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ underway to hold managed care entities
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ more accountable,"ÿÿÿ ÿÿÿÿ agrees Curtis A.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Cole, a partner at the Los Angeles office
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ of Thelen, Marrin, Johnson & Bridges.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Likewise, he points toÿÿÿÿ ÿÿÿ "an increased
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ movement in consumerism" aimed
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ directly at managed care.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The need for consumer protections in a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ managed care environment was even
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ stressed by President Clinton in remarks
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ delivered last January before a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Democratic Unity - Health Care Bill of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Rights event
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ While Clinton applauded managed care
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ for "helping to tame the inflation beast in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ health care," he nevertheless warned that
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ putting people at risk because they don't
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ have consumer protections was
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ unjustified.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿÿ "You cannot justify putting people who
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ pay their insurance premiums, and who
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ are working hard...at the kind of risk that
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ so many Americans are at today,"ÿÿÿ ÿÿÿÿ Clinton
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ said, adding protections should be
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ elemental in today's American society.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿÿÿÿ GREATER EXPOSUREÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Although the specifics ofÿÿÿ ÿÿÿÿ proposed billsÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ may differ,ÿÿÿÿ ÿÿÿ common to most of them is
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ language that exempts the MCO from the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Employee Retirement Income Security
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Act (ERISA) preemption of state law. In
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ doing so, the proposed legislation
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ essentially removes the MCOs' ERISA
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ protection from state-law claims.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ "The concerns that employers have with
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ regard to the legislation being considered
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ is that the logical extension will expose
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employers to a greater risk of liability.ÿÿÿÿ ÿÿÿ If
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ these [ERISA] statutes are changed,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employers will potentially be on the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ hook,"ÿÿÿÿ ÿÿÿ says Willert.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ A further erosion of protections enjoyed
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ by HMOs occurred last year with passage
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ of legislation in Texas that has pierced
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the ERISA shield by allowing HMOs to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ be sued in state court. If HMO decisions
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ promote negative outcomes for
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ subscribers, the law allows them to sue.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ And similar legislation is being
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ considered by more than 30 other state
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ legislatures.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿ "The amount of litigation lodged directly
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ against managed care [entities] is
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ increasing,"ÿÿÿÿ ÿÿÿ observes
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ Cole. "I believe it's just a matter of time
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ before the ERISA preemption is
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ weakened or taken away."ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ But if ERISA preemption is taken away
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ as some suggest, then what happens to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employers? The question weighs heavily
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ on Robert Trinka's mind.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿ "If ERISA doesn't protect HMOs from
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ certain types of legal actions, is the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employer [still] protected?ÿÿÿÿ ÿÿÿ asks Trinka,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ vice president and head of southeast
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ operations for McKenna & Associates
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Managed Care Insurance Services Inc.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Trinka, based in Miami, predictsÿÿÿÿ ÿÿÿ "the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ plaintiffs' Bar will test it as soon as they
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ can."ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿ Trinka also believes that HMOs won't
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ fare as well in a courtroom as the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ providers who preceded them. "Doctors
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ have generally enjoyed a high degree of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ jury sympathy.ÿÿÿ ÿÿÿÿ They are well-respected
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ members of their community, and they
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ make good witnesses. It has been difficult
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ for juries to find against doctors."
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿ Can the same be said for HMOs?
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Probably not,ÿÿÿ ÿÿÿÿ says Trinka, who observes
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ that HMOs are generally viewed with
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ suspicion and often thought of as having
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ deep pockets.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ And employers who are brought into the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ courtroom directly on the heels of their
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿ HMOs, experts predict, are likely to face
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the same negativity.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ A 1996 Supreme Court decision handed
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ down in Varity Corp. v. Howe also has
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ raised the potential to significantly
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ increase the liability exposure of plan
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ sponsors and MCOs,ÿÿÿ ÿÿÿÿ adds Richard
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Betterley, managing director of Betterley
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Donoghue, Boston-based risk
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ management consultants.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ As explained in an article authored by
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Alden J. Bianchi Esq., and published in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the bimonthly Betterley Donoghue Report,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿ Varity Corp. transferred some of its
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ troubled divisions to a new subsidiary,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Massey-Ferguson Combines, apparently
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ knowing that Massey-Ferguson would
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ fail.ÿÿÿ ÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Varity told employees that if they
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ accepted employment with the new
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ subsidiary and gave up certain welfare
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ benefits to which they were previously
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ entitled, they would be entitled to similar
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ benefits in the new division's plan.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ However, wrote Bianchi, "by overstating
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the assets of Massey-Ferguson and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ understating its liabilities,ÿÿÿÿ ÿÿÿ Varity was
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ able to mislead the transferring
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employees into believing that the benefits
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ which they received in the exchange
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ would be secure."ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Once Massey-Ferguson failed, the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employees sued Varity claiming that they
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ had breached their fiduciary duties to the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employees and that, as a result, Varity
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ should make good on the promised
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ benefits.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿ Both the lower courts and the Supreme
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Court found that a breach of fiduciary
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ duty had indeed occurred.ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ "The problem with the Varity case is that
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ it opens the door to plaintiffs and their
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ lawyers to dress up denial of benefit
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ claims as breaches of fiduciary duties,"ÿÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ wrote Bianchi. "Thus, the ruling can be
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ expected to result in a flood of new
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ benefit-related claims."
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ David Brantlinger, vice president of the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ CIMA Cos., the third-largest broker and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ risk management consulting firm based in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the Washington area, points out that the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Varity case clearly indicated fiduciaries
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ cannot fulfill their ERISA obligations
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ merely by reserving the right in plan
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ documents to change benefits.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿ "Many observers are concerned that even
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ where deception is not involved,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employers have a new obligation to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ signal intended changes in benefit plans
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ that are subject to ERISA,"ÿÿÿ ÿÿÿÿ he says.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ "Fiduciary liability, while once a finite
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ area of responsibility with respect to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employee benefit plans, has expanded
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ beyond the familiar bounds and continues
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ to do so."
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿ Betterley observes that many employers
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ still labor under the misperception that
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ they are not potentially liable for their
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ actions with respect to health plan
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ decisions or changes, nor are they
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ potentially liable for the actions of the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ MCOs serving the health-care needs of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ their employees. It is this misperception,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ experts warn, that will prove costly.ÿÿÿ
----------------
ÿÿ ÿÿÿÿ Betterley observes that many employers
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ still labor under the misperception that
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ they are not potentially liable for their
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ actions with respect to health plan
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ decisions or changes, nor are they
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ potentially liable for the actions of the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ MCOs serving the health-care needs of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ their employees. It is this misperception,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ experts warn, that will prove costly.ÿÿÿ
-----------------
ÿÿ ÿÿÿÿ Betterley observes that many employers
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ still labor under the misperception that
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ they are not potentially liable for their
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ actions with respect to health plan
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ decisions or changes, nor are they
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ potentially liable for the actions of the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ MCOs serving the health-care needs of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ their employees. It is this misperception,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ experts warn, that will prove costly.ÿÿÿ
-------------------------
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ TAKING ACTION
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Just as managed care companies are
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ recognizing - and addressing - their
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ expanding liability as public and political
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ sentiment rises against them, employers
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ should likewise take action.
ÿÿÿÿÿÿÿÿÿ ÿÿÿÿ "The employer really has to do his or her
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ homework," says Brantlinger, stressing
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the importance of making the right MCO
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ choice in the first place. The employer
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ should not hesitate to use the services of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ an experienced broker and request a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ detailed side-by-side comparison of the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ services various prospects offer, he says.
ÿÿÿÿÿÿÿÿÿÿÿÿÿ Some of the questions which should be
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ asked and answered to the employer's
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ satisfaction, as outlined in The CIMA
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Letter, include:
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ - Can the plan achieve its cost-control
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ objectives without jeopardizing quality of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ care?
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ This question would prompt a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ review of such issues as
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ -providerÿÿÿ selection,ÿÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ -the form of discipline applied
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ when standards of performance are not
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ metÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ -and the financial incentives given to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ providers to control costs.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ What utilization review techniques does
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the plan use?
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ -ÿÿ Is the plan accredited?
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ - Does the plan assume fiduciary liability
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ for those things over which the employer
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ has no control, such as provider
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ credentialing, claims determinations and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ utilization review?
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ - If terms such as "medically necessary,"
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ "experimental" and "reasonable and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ customary" are used in the managed care
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ plan's group master contract, is it clear as
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ to how the plan interprets these terms?
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Are the definitions consistent with the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employer's own plan document and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ summary plan description?
ÿÿÿÿÿÿÿÿÿÿÿÿÿ Brantlinger stresses the importance of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ scrutinizing every provision of the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ contract and having the plan assume
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ liability wherever possible.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Also critical, he adds, is paying close
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ attention to the communication materials
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ that introduce an employer's health-care
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ plan to employees. Those materials
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ should be clear that it is the treating
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ physician, not the health-care plan or the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employer, who determines the course of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ medical treatment, Brantlinger says.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Likewise, it should be clear that the issue
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ of whether or not the plan will cover all
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ or part of the treatment cost is secondary
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ to the decision of what the treatment
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ should be.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ "The need for liability coverage to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ protect against lawsuits brought by angry
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employees against employers offering
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ managed care health benefits has become
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ more urgent," adds Betterley.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Employee Benefit Administration Error
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ & Omissions as an optional coverage
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ through the Commercial General Liability
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ policy; excess umbrella liability policies;
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ fiduciary liability insurance; and liability
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ policies designed specifically for
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employers that use managed care can go a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ long way toward protecting the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ employer's financial position if it is
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ named in a managed care liability suit, he
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ adds.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ All of these precautions, stress experts,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ are becoming increasingly important in an
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ environment in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ which potential defendants are growing
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and the rules that are creating them are
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ anything but certain.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ While Van Loon is hopeful that greater
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ clarity may emerge "as we move
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ forward," he says at present there is not a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ well-defined body of case law as to who
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ is culpable in managed care liability
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ litigation," he warns.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Nancy E. Taylor, a shareholder in the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Washington office of Greenberg Traurig,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ also believes change is on the horizon.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Taylor, who advises clients on
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ health-care matters, says managed care is
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ experiencing "a time of great fluctuation."
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ One of the elements likely to fluctuate,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ she says, is the path liability will
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ultimately take.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ And whether or not the employer sits
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ prominently at the end of the path may
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ still be a point of debate. Experts
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ concede that so far, there has not been a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ mad rush of their MCOs' actions.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Cole also says employers are creating
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ purchasing groups for managed care - a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ strategy that may actually insulate
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ individual employers.
ÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿ Yet experts maintain that emerging legal
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and legislative trends undoubtedly
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ foreshadow tougher times for employers
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ with respect to managed care liability.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Employers, they caution, should consider
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the issue now - before it's too late. |
