Office of the Attorney General News Release Archive



Wednesday, June 21, 2000

CORNYN SUCCESSFULLY DEFENDS TEXANS' RIGHT TO SUE HMOs

AUSTIN - Texas Attorney General John Cornyn today applauded the Fifth Circuit's decision to uphold Texans' right to sue their HMOs for medical malpractice. Late yesterday, the Fifth Circuit ruled that a federal law, the Employee Retirement Income Security Act of 1974 (ERISA), did not preempt a Texas statute that allows malpractice actions against HMOs.

"This decision is very good for consumers. It reaffirms the state's ability to regulate HMOs and the quality of medical decisions that HMOs make," said Attorney General John Cornyn.

In another benefit to consumers, the Court upheld the State's authority to stop HMOs from penalizing doctors for advocating medically necessary treatment. The Court rejected Aetna's argument that ERISA also preempted this part of the Texas law. The Court's opinion explains, "the anti-retaliation provision avoids the situation in which the doctor must choose between satisfying his professional responsibilities and facing retaliatory action by the managed care entity. Together, the provisions thus better preserve the physician's independent judgment in the face of the managed care entity's incentives for cost containment."

The Health Care Liability Act (S.B 386), passed in 1997, allows consumers to sue their HMOs when they suffer harm due to the negligence of their HMO. On June 16, 1997, Aetna sued the State to prevent this law from going into effect and to stop the Insurance Department and the Attorney General from enforcing it.

The Court also reaffirmed the Attorney General's authority to pursue actions against HMOs under the Texas Deceptive Trade Practices Act and the Insurance Code.

The Fifth Circuit did find that the Independent Review provisions of the Texas law were preempted by ERISA. In 1999, legislation was passed to allow the voluntary use by HMOs of these independent review provisions, which have been working very well since 1997. The independent review is provided through the Department of Insurance, and most HMOs are participating in the process.

Today, Attorney General Cornyn encouraged all HMOs to continue to voluntarily use the independent review and said that he will seek specific commitments from the HMOs the state is currently litigating against to continue to provide this protection to consumers.

District Judge Gilmore heard this case in September 1998. Aetna appealed this decision to the Fifth Circuit. David Mattax, Chief of the Financial Litigation Division of the Attorney General's Office, argued the case for the State. The case is Corporate Health Insurance, Inc. vs. Texas Department of Insurance.

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Contact Mark Heckmann, Heather Browne, or Tom Kelley at (512) 463-2050