Ruling Affects HMO Contracts regarding Arbitration

Article excerpt

By Ronda Fears

Journal Record Staff Reporter

A recent Oklahoma Supreme Court ruling impacts all health maintenance organizations that insert mandatory, binding arbitration clauses in their contracts, many state employees and maybe all contracts with such provisos.

In a 5-4 decision March 30, the court barred a Tulsa County district judge from ordering a state employee to arbitrate a dispute with PacifiCare of Oklahoma _ an HMO contracted by the State Employees Group Insurance Plan.

Oklahoma City attorney A. Daniel Woska, chairman of the Oklahoma Bar Association arbitration subcommittee, said the decision was sweeping and would likely lead to numerous challenges of arbitration clauses in contracts in Oklahoma. There are several such disputes pending in state courts now.

The basis of the Cannon vs. Lane decision was threefold: First, Oklahoma's version of the Uniform Arbitration Act excludes collective bargaining agreements, or union labor contracts, and contracts regarding insurance; second, the law states that agreements where a person is restricted from enforcing his-her rights through usual legal proceedings are void; and, third, that a waiver of rights regarding future unknown disputes is not valid.

PacifiCare had argued an HMO did not fall in the category of health insurance.

An HMO is generally described as a firm that provides health maintenance and treatment services for a predetermined, fixed charge; the enrollee makes routine payments. Health insurance generally provides reimbursement for healthrelated costs; the policyholder makes premium payments.

The court disagreed that there is a material distinction between the two.

"Health maintenance organizations are alternatives to health insurance," wrote Justice Alma Wilson for the majority, in the April 3 issue of The Oklahoma Bar Journal.

"We hold that the contract between the State of Oklahoma and PacifiCare is a contract with reference to insurance, and it is expressly excluded from the provision of the Uniform Arbitration Act."

There are roughly 79,900 state employees, according to Oklahoma Employment Security Commission records. …