Arbitration Emereges a Troublesome Issue for HMOs

Article excerpt

LOS ANGELES _ Terre Wertz said she was told everything was going fine with her pregnancy. But her son was born with multiple birth defects, which she believes should have been detected with better prenatal care.

She decided to sue her health plan, Cigna Health Plan of California, but the suburban Sylmar, Calif., resident found that she could not.

When she joined the HMO years earlier, Wertz said, she unknowingly signed away her rights to a court trial and agreed to settle all disputes through arbitration.

Whether they know it or not, millions of Californians have done the same.

Most California health maintenance organizations require their members to enter into binding arbitration agreements, requiring them to forgo their rights to a jury trial and settle bad faith or malpractice lawsuits through private arbitration.

A growing number of doctors are also asking their patients to sign arbitration agreements before they will provide treatment.

Among those plans that require arbitration are Blue Cross of California, Kaiser Permanente, PruCare of California, Health Net and PacifiCare. Blue Shield of California and FHP International Corp. do not have binding arbitration provisions.

Consumer groups say the arbitration clauses are unfair because most people don't read their contracts carefully enough to realize they've given up their right to sue in court until it's too late, said Jamie Court, executive director of Consumers for Quality Care Project, a Los Angeles nonprofit organization.

And even if they notice the arbitration clause, they have no choice but to accept the provision or seek coverage from a health plan that doesn't require arbitration.

Plaintiffs' attorneys say arbitration is weighted in favor of HMOs because the settlement awards are usually smaller than those handed down by juries.

"It's not as fair to the victims," said Kenneth M. Sigelman, an attorney in Los Angeles.

But HMO officials disagree, saying arbitration is fair and faster than the courts, while stemming the huge awards sometimes issued by juries. The problem is particularly severe in health care, where ill or dying victims can affect the emotions of jurors.

"The sympathy factor tends to go to the individual and not the corporation," said Pat Keane, director of litigation at Blue Cross of California. "We believe arbitration is more beneficial to us in terms of outcome."

Kaiser Permanente prefers arbitration even though officials estimate they lose more cases in arbitration than if they were trying them in court.

According to Trischa O'Hanlon, senior counsel at Kaiser, plaintiffs in arbitration usually are awarded some kind of settlement, albeit less than they had requested.

"But it's more predictable. You don't have the outliers, like the $25 million verdicts," O'Hanlon said.

The growth in arbitration over the past 20 years has been fueled by the nation's overcrowded court system and rising legal fees.

"We want our doctors practicing medicine, not sitting in courtrooms," O'Hanlon said.

Though HMO attorneys agreed that consumers are less likely to win multimillion-dollar awards in arbitration, they argued that such awards are excessive and usually are overturned on appeal.

Last year, an $89 million jury award against Health Net sent shock waves through the HMO industry. The suit was filed by the family of a breast cancer victim who was denied a bone-marrow transplant by Health Net to treat her condition.

Health Net appealed and the family ultimately settled out of court for a smaller amount.

Some HMOs, such as Kaiser, have been using arbitration since the 1970s. Others have added the provision to their contracts in recent years.

Under arbitration, each side selects one arbitrator _ often a retired judge _ to represent their views. …