The University Record, February 21, 2000

ERISA: a ‘colossus over the managed care environment’

By Amy Reyes
News and Information Services

In an analysis that gets at the heart of the Patients’ Bill of Rights proposal in Congress, a U-M public health researcher concludes that holding managed care organizations (MCOs) legally accountable is necessary to protect patients’ rights and physician autonomy.

In the Feb. 16 issue of the Journal of the American Medical Association, Peter D. Jacobson, associate professor of health management and policy, and Scott D. Pomfret, an attorney with Ropes & Gray in Boston, revisit the 1974 federal Employee Retirement Income Security Act (ERISA) that regulates employee-sponsored health care plans.

Amending ERISA, they conclude, is a long overdue necessity that will give physicians the freedom necessary to offer their patients the best care possible. Amending ERISA also will allow patients the right to sue their managed care organization.

“ERISA has played an important role in facilitating, and perhaps stimulating, the development of managed care . . . [but] it has insulated MCOs from liability by blocking state courts from resolving litigation challenging managed care practices,” the authors write.

As written, ERISA preempts state regulation of managed care organizations and drastically limits state medical liability lawsuits against managed care organizations. However, it provides minimal federal regulation in its place. The authors described ERISA as a “regulatory vacuum” and a “colossus over the managed care environment.”

Either congressional action to amend ERISA or creating new federal regulations, similar to recently adopted state initiatives, is necessary to ensure that patients are treated fairly by the system, the authors write.

“Even though physicians would remain accountable, MCOs should also be held accountable for financial decisions that affect clinical treatment and for their implicit role in making medical decisions. Physicians should not be left in an untenable position where they are entirely responsible for cost containment provisions they have no control over. By exposing MCOs to similar liability considerations, MCOs will not be able to influence medical decisions with impunity, which may enhance physician autonomy. Holding MCOs legally accountable is useful in providing incentives for better health plan administration,” the authors write.

Jacobson was a senior behavioral scientist with the think-tank RAND. His current research interests focus on the relationship between law and health care delivery and policy, tobacco control policy and violence prevention.

Scott D. Pomfret is an associate with Ropes & Gray in Boston and was a clerk for the Hon. Norman Stahl on the 1st U.S. Circuit Court of Appeals.

This study was funded by an Investigator Award in Health Policy Research from the Robert Wood Johnson Foundation.