As a result of the Employee Retirement Income Security Act of 1974 (ERISA), enrollees in employer-sponsored health plans are generally unable to pursue legal remedies for injuries resulting from actions or decisions of their health plans under state law. They may seek redress only in federal court under provisions of ERISA, which limit damages to the cost of the plan benefits under dispute, and in certain cases, attorneys’ fees and court costs. In recent years, some federal courts ruled that enrollees could sue their plans in state courts for vicarious liability for the medical negligence of the plan’s providers. But disputes over denial or delay of coverage have largely been preempted by ERISA.

In 2001, the Senate passed S. 1052, “Patients’ Bill of Rights” legislation. S. 1052 would have expanded patients’ protections under ERISA by giving them the right to have adverse coverage decisions by HMOs reconsidered through a system of internal and external review. “Internal review” involves a reexamination by the HMO itself of the initial decision to deny coverage. “External review” involves a separate arbitration-type procedure conducted by an outside panel of neutral doctors. If dissatisfied, the patient would have been permitted to appeal an internal review decision to an independent review panel of doctor-arbitrators. S. 1052 also contained provisions to remove the ERISA shield and permit cases to be brought in state court under state laws by injured patients enrolled in employer-sponsored plans.

After much negotiation, the House passed a similar bill, H.R. 2563, as amended. As amended, the bill would have permitted an injured patient to bring a cause of action against an employer-sponsored health plan in state court but would have imposed certain federal standards. H.R. 2563 would also have imposed a cap of $1.5 million on non-economic damages. Although the liability provisions contained in H.R. 2563 differed significantly from those in S. 1052, the internal and external review provisions in the two bills were almost identical. A House-Senate conference committee was not appointed and the legislation died at the end of that Congress. The legislation was reintroduced in subsequent Congresses but saw no action. Patients Bill of Rights legislation was introduced in this Congress as H.R. 979.

• Since ERISA was passed, traditional insurance, in which the doctor makes the decision about a patient's care, has given way to managed care. Because managed care plans with an emphasis on cost containment did not exist when Congress passed ERISA, the legislation was not written to address such plans.


• Managed care companies should be held to the same standards of accountability we expect of doctors, nurses, hospitals, and other health care professionals if their decision to deny or delay medically necessary care that is covered under the insurance policy results in harm to a patient.


• In 2001, the Congressional Budget Office estimated that the liability provisions of legislation like S. 1052 would raise premiums by .08 percent for employer-sponsored health insurance. A 1998 Kaiser Family Foundation report studied the extent of litigation in insurance programs where consumers can sue their health plans. It found very low rates of litigation and estimated monthly costs of $0.03-$0.13 per enrollee.


• In many cases, internal and external review will result in patients receiving the care that they are entitled to without the necessity of pursuing costly and time-consuming legal action. It is essential, however, that such ADR programs be developed with due process safeguards for the rights of all participants in the process.

The ABA supports legislation establishing ADR procedures as one remedy for resolving disputes between patients and group health plans. The ABA opposes preemption of state tort laws by enactment of federal medical liability legislation and supports removing the ERISA shield and permitting injured patients to bring an action in state court under state laws. The ABA also opposes caps on pain and suffering damage awards.