The U.S. Supreme Court today in a 5-4 decision ruled that Illinois can force insurers to submit to the decisions of an outside review panel.
In doing so, the court upheld a 7th U.S. Circuit Court ruling that the Employee Retirement Income Security Act of 1974 does not pre-empt Illinois' HMO Act.
The decision is a blow to the insurance industry, which has been fighting the current system of state-governed external reviews. Health plans, arguing that divergent laws raise costs, say they are not opposed to external review but want a federal standard.
"The great danger is that with costs already skyrocketing, employers navigating varying state laws may be forced to reconsider whether they will offer health insurance for their employees," said Donald Young, M.D., president of the Health Insurance Association of America, Washington.
Federal law, however, says nothing about the right to second opinions, said Justice David Souter, writing for the majority. He was joined by Justices John Paul Stevens, Sandra Day O'Connor, Ruth Bader Ginsburg, and Stephen Breyer.
The case centered on Debra Moran, who approached her doctor in 1996 with pain and numbness in her right shoulder. Her primary-care physician recommended that Moran's insurer, Rush Prudential HMO, approve surgery by an unaffiliated specialist. Rush denied the request on the grounds that the procedure was not medically necessary and proposed that Moran undergo a different procedure with a Rush-affiliated physician. Moran made a written demand for an independent medical review of her claim, as allowed under Illinois' HMO Act.
A state court ordered the review, and the panel found the treatment necessary. Rush again denied the claim. While the suit was pending, Moran had the surgery recommended by her primary-care physician and amended her complaint to seek reimbursement. Rush moved the case to federal court, arguing that the amended complaint involved a claim for ERISA benefits.
A district court opinion treated Moran's claim as a suit under ERISA and denied it on the ground that ERISA pre-empted the HMO Act. That ruling was reversed in the 7th Circuit, which the Supreme Court upheld.
In the minority opinion, Justice Clarence Thomas wrote that the ruling "undermines the ability of HMOs to control costs, which, in turn, undermines the ability of employers to provide healthcare coverage for employees." He was joined by Chief Justice William Rehnquist and Justices Antonin Scalia and Anthony Kennedy.