A group of plaintiffs' lawyers who earned millions suing the cigarette industry are readying a new onslaught of lawsuits against another unpopular target: health maintenance organizations.
In the coming weeks, an Atlanta-based affiliation of lawyers from the tobacco wars will file class-action lawsuits based on a variety of innovative legal arguments, hoping to wrest settlements from HMOs on behalf of employers and individual patients. As this coordinated attack unfolds, other lawyers across the country are stepping up separate efforts to sue health insurers.
Until lately, insurance companies and health maintenance organizations have been considered relatively immune to litigation because of a quarter-century-old federal law. During the last few years, however, a handful of HMO patients and their attorneys have begun to knock certain chinks in that law, convincing juries they were harmed by inadequate medical care. Now, trying to capitalize on widespread public antipathy toward managed care, lawyers plan to broaden their legal strategy by accusing HMOs of profiteering and fraud.
Some of these theories are risky and untested, and it remains unclear how vulnerable insurers will be to this new legal assault. But regardless of whether it succeeds, experts predict an unprecedented wave of health insurance litigation that eventually might rival the outpouring of private legal dollars spent battling cigarette makers and, more recently, the gun industry.
"Many people five to 10 years ago thought the lawyers pursuing the tobacco companies were out of their mind. As of a week ago, we find the attorney general of the United States pursuing them," said Robert Perez, a plaintiffs' lawyer in Cincinnati who specializes in suing health insurers. "Things change."
This search by lawyers for new ways to hold health plans responsible for their decisions amounts to a second line of attack on managed care at a time when Congress and state legislatures are polarized over how hard to chip away at the power and autonomy of HMOs. For the most part, these plans have had a relatively unfettered hand in dictating the care their patients receive.
The House is scheduled to vote next week on competing managed-care bills, and members are divided over whether patients should have the right to sue their HMOs. GOP leaders oppose the idea, which was omitted from an HMO bill that passed the Senate in July, but it is favored by Democrats and a few dissident Republicans, who appear likely to have enough votes to prevail.
Paradoxically, the impending wave of lawsuits, reported in yesterday's Wall Street Journal, delighted lobbyists for the insurance industry, who said it buttressed their view that litigation drives up health costs and enriches trial lawyers at the expense of consumers and the employers who pay for their insurance. The coming cases "out the real goals here for the trial bar--suing health plans [and] feathering their nest being goal number one," said Karen Ignagni, president of the American Association of Health Plans.
The ability of most patients to sue their insurers has been largely obstructed by the 1974 Employee Retirement Income Security Act. It was intended to protect Americans' pensions but has been largely interpreted by the courts as prohibiting patients from suing insurers in state courts or from collecting damages.
Recently, a few lawyers have won big awards on behalf of government employees not covered by that law, and appellate courts in parts of the country have begun to allow certain kinds of suits even by people who are covered.
Last month, the 3rd U.S. Circuit Court of Appeals permitted a lawsuit by the parents of a New Jersey couple who allege that their baby daughter died of meningitis a few days after birth after an HMO refused to let the baby be readmitted to a hospital or to send a nurse to visit her at home. Just this week, the Supreme Court agreed to hear a case that challenges HMO policies giving physicians incentives to hold down medical costs and stint on care.
Lawyers involved say the impending suits are designed to force HMOs to hand back more of the cost savings they have extracted from doctors and hospitals. "Managed care is in all likelihood here to stay, but our view is that our clients--both individual members and corporate employers--are entitled to receive the full economic benefit of what they're paying for," said John Guttmann, a partner at Beveridge & Diamond who is getting ready to file several suits against HMOs.
Much of the litigation is being orchestrated from a suite of offices in downtown Atlanta, where a collection of plaintiffs' lawyers from a number of states have established what they call a "law firm of law firms." Herman, Middleton, Casey & Kitchens was born roughly a year ago, funded primarily by lawyers who were awarded huge fees in the tobacco litigation, which ended with a record $246 billion settlement.
Russ Herman, one of the firm's founding partners, declined to say how much each participating lawyer anteed up to launch it, nor would he discuss which HMOs the group plans to sue.
Lawyers plan to offer what Herman called a "gumbo" of arguments to suggest that HMOs have pocketed ill-gotten profits by defrauding or breaking their contractual obligations to employers and patients. Some suits will contend that plans have systematically overcharged participants; others will seek lost income for physicians who were forced to take drastic pay cuts in order to work for HMOs.
Still other suits will push the theory that plans have breached a fiduciary duty by failing to disclose how decisions are made about which patients get how much care. "They use different criteria, and we believe that the overwhelming criteria they use is cost," said Joseph Sellers, a partner at Cohen, Milstein, Hausfeld & Toll, a D.C. firm that is not part of the Herman, Middleton group.