Employer-Based Managed Care Plans:
ERISA's Effect on Remedies for Benefit Denials and Medical Malpractice
HEHS-98-154, Jul 13, 1998
Pursuant to a congressional request, GAO reviewed how people enrolled in employer-based managed care plans are compensated when they are improperly denied health care benefits or when they experience negligent medical care and the role that the Employee Retirement Income Security Act (ERISA) plays, focusing on: (1) whether the transition from traditional employer-based fee-for-service health plans to managed care has changed the process of benefit determination; (2) the remedies that ERISA provides to participants in employer-based managed care plans who are improperly denied benefits; (3) whether ERISA affects the ability of participants to be compensated for injuries that result from either medical malpractice or improper benefit denials at employer-based managed care plans; and (4) the consequences of changing ERISA's remedies.
GAO noted that: (1) managed care plans attempt to ensure that enrollees receive services that are necessary, efficiently provided, and appropriately priced; (2) since the 1980s, employers have shifted to offering managed care plans that use such techniques as prospective utilization review (UR); (3) as a result, benefit coverage decisions have increasingly shifted from being made after services are provided to before; (4) ERISA effectively limits the remedies available when employees of private-sector firms claim to have been harmed by plans' decisions to deny coverage of a particular service; (5) under ERISA, plans must have an appeal process for participants who are dissatisfied with a benefit denial; (6) if participants are not successful, they can file a civil lawsuit; (7) ERISA's exclusive remedy for improper benefit denials is to require the plan to provide the denied service and, at the court's discretion, pay attorney fees; (8) groups representing consumers believe that ERISA's limited remedy neither provides sufficient compensation for injuries that benefit denials contribute to nor effectively deters unjustified benefit denials; (9) ERISA can affect participants' ability to be compensated for injuries sustained while in an employer-based health care plan; (10) ERISA's preemption of state laws that relate to employee health benefit plans enables managed care plans and UR firms to avoid liability under state law for medical malpractice; (11) compelling evidence is lacking on the likely effects of amending ERISA to provide either expanded remedies for losses due to disputed benefit denials or the ability to sue managed care plans for medical malpractice under state tort laws; (12) consumer groups and others assert that additional remedies could: (a) improve health care quality by holding plans accountable for the consequences of their benefit coverage decisions; and (b) provide participants with a course of remedies more comparable to state tort laws; (13) managed care plan and employer groups maintain that these additional provisions would result in increased costs or benefit reductions; and (14) to date, data are not available to accurately estimate the extent to which the quality of health care would improve or the amount by which the costs of plans, employers, and employees might change if ERISA's remedies or preemption of state laws were amended.