Published in: New York Times, National Edition, Saturday, August 19, 2000, p. B3:

"Managed Care Companies Seek to build on a Legal Victory: A Court Ruling Brings Moves to Consolidate Consumer Suites".

By Milt Freudenheim:

Heartened by a Federal court victory in Philadelphia last week in the managed care wars, lawyers for several major health insurance companies are seeking to consolidate a host of lawsuits accusing managed care companies of misleading customers. They also hope to transfer the suits from Miami to Philadelphia.

The Federal district judge who is hearing arguments in the cases in Miami said Thursday that he would rule shortly on whether to suspend action while requests to move the suits are decided.

The plaintiffs, consumers who are seeking class-action status for their suits, say the main issues in the cases are still in contention. They accuse managed care companies of violating at least two important Federal laws. They say that the companies are violating racketeering laws by misleading consumers about the quality of health care they are receiving, and they contend that the companies are violating their Fiduciary duties under the Employee Retirement and Income Security Act, or Erisa.

A Federal Appeals Court in Philadelphia ruled last week that the U.S. Healthcare unit of Aetna did not violate racketeering laws when it advertised that it was providing quality medical care even as it was encouraging cost-cutting by doctors. The company had defended the advertising as permissible "puffery".

Lawyers on both sides in the managed care lawsuits said that ruling, which upheld dismissal of the racketeering charge by a lower court last October, was a blow to arguments in suits across the country that rely on the Racketeering Influenced and Corrupt Organization law, which can result in triple damage awards.

But the plaintiffs' lawyers said the ruling in Philadelphia did not apply to the types of racketeering claims they are making in the Florida cases. And they are still seeking court rulings on charges that managed care practices violate other laws.

Stephen Neuwirth, one of the plaintiffs' lawyers, said that in a ruling in June, the Supreme Court offered indirect support for assertions that managed care officials had violated their Fiduciary duties to patients under Erisa.

He noted that the high court suggested that managed care companies might have a Fiduciary duty to disclose information beyond the requirements of the Erisa law.

The Supreme Court is likely to face the issue of disclosure under Erisa again. Mr. Neuwirth, a partner with Boies Schiller & Flexner, said appeals courts had ruled both for and against the managed care industry on the issue: supporting the companies in a Texas case and ruling against them in Missouri.

The main thrust of the Supreme Court decision in June, however, upheld core practices of managed care. In that case, the court dismissed a federal lawsuit by an Illinois woman, Cynthia Herdrich. She asserted that her health plan had violated its duty under Erisa by placing its own financial interests ahead of its members' well-being by offering incentives to doctors to restrict care.

In the Herdrich ruling, Justice David H. Souter wrote for the court that financial incentives were essential in managed care, and noted that Congress had encouraged the managed care system.

Several lawyers for the companies declined to speak on the record.

Aetna and its Prudential Health Care unit have asked a committee of Federal judges, the Multidistrict Litigation Panel, to consolidate at least eight cases against Aetna and Prudential and transfer them to Philadelphia. Other companies seeking consolidation would not comment for the record. Industry lawyers said several other big managed care companies were considering making similar requests to the panel.

Plaintiffs' lawyers, including some from firms that have won big class-action settlements against tobacco companies, have asked the Multidistrict Panel to consolidate the federal managed care cases in Miami. The Panel is expected to decide the issue at a September 22 meeting in New York.

Judge Federico Moreno also said in Miami Thursday that he would rule next month on a separate request by Humana to dismiss the suits against that company. Humana had agreed to consolidate the suites in hopes of obtaining an early decision.



Top of Page - Clinical Freedom Home Page - Freedom of Choice Medical Care - Current Events -

For Further Information and Feedback:
E-mail: frensasc@ix.netcom.com
John H. Frenster, M.D.
Physicians' Educational Series
247 Stockbridge Avenue
Atherton, CA 94027-5446
Phone: 650/367-6483
Fax: 650/364-1773
WebSite: http://www.frenster.com/

clinicalfreedom: "the ability of the patient and the physician to do all that is medically necessary without interference".