Dead Judge's Lawsuit Raises Insurance Liability Issues
By Evan George
Daily Journal Staff Writer
This article appears on Page 1
LOS ANGELES - Superior Court Judge David Mintz felt more comfortable hearing other people's cases than airing his own. But when a health insurer refused to pay for the only treatment doctors said could save his life, Mintz launched a quiet legal fight to make the company reverse that decision, or else be held accountable.
Though Mintz died of lung cancer in May, his case lives on by appeal.
His lawyers say it is the first suit in California to expose a liability loophole that shields insurers from being sued over coverage disputes with CalPERS beneficiaries.
The case could answer a significant legal question for all state employees with health insurance: When a for-profit insurer is hired to oversee a public employee's health benefits, can that company be held liable for denying care?
The lower court answered "no" when it threw the case out last year. But some legal experts believe the appeals court will pay new scrutiny to the issue. Patients enrolled in an HMO or private insurance typically contest decisions through administrative appeals or through state agencies if a health plan refuses to pay for a procedure it considers experimental or unnecessary. But patient advocates adamantly defend the right to sue insurers as a crucial last resort.
At stake is whether CalPERS enrollees have that right. Mintz, 49 when he died, had medical coverage through the California State Public Employees' Retirement System, the nation's largest public pension fund. Like tens of thousands of other state and local government employees, his medical care came via Anthem Blue Cross, whose medical directors ultimately decided Mintz was not eligible for the treatment he sought.
Rather than fight the public pension fund that paid for his health care, Mintz and his wife, Susan, sued Anthem Blue Cross as the administrating decision-maker.
Susan Tannenbaum Mintz, an L.A. County deputy district attorney, said they sued "to be sure that he would get the treatment that he needed." When that failed, she said, the legal issue at stake was too important to give up.
"It makes it so that all employees of any government agency that contracts out administration decisions to a health plan have pretty much no redress," she said.
The complaint accuses Anthem Blue Cross of first approving then denying needed medical care, and holds them solely responsible for that decision. The allegations include breach of contract, intentional and negligent interference with contract rights and infliction of emotional distress. Mintz v. Blue Cross, BC372894 (L.A. Super. Ct., filed June 19, 2007).
The case is pending before the 2nd District Court of Appeal after Los Angeles County Superior Court Judge Reginald A. Dunn dismissed the case in March.
Anthem Blue Cross attorney Kurt C. Peterson, a partner with Reed Smith in Los Angeles, directed requests for comment to a spokeswoman for Anthem Blue Cross. The company declined to comment on the case or on any issues related to CalPERS health plans.
But in various motions filed by Anthem Blue Cross, the company has argued that no enforceable contract exists between the company and patients like Mintz, and hence "no legal duty is owed to the insured." The company also defends denying the requested treatment.
Lawyers for Mintz said their appeal would partly focus on showing that third-party administrators like Anthem Blue Cross are liable if they are contracted to review medical records and approve or deny coverage to CalPERS enrollees.
"I think people similarly situated would like to know whether this insurance company can do whatever they want with impunity," said Mike Bidart, a partner with Shernoff Bidart Darras and Echeverria in Claremont.
Bidart said it is a question of when - not if - other state employees are plagued by the same problem.
More than 1.2 million state employees rely on medical coverage from CalPERS. The pension fund is the third-largest buyer of health care nationwide, after the federal government and General Motors.
About 173,00 employees hold the Anthem Blue Cross policies, which are called "preferred provider organization," or PPO plans. Factoring in family members, these PPO plans cover roughly 319,000 Californians, according to CalPERS.
Unlike with HMOs, where members sign a direct contract with the managed care company, the PPO plans are funded by CalPERS, which then hires Anthem Blue Cross to manage the day-to-day business and patient decisions, like approving and denying claims.
That allows CalPERS employees essentially to rent a network of doctors and administrators at a low cost. The model has won accolades from health care reform proponents who see expanding the CalPERS self-insured pool as a viable option for cutting costs.
But it also means that enrollees sign a contract with CalPERS and not the company that is actually driving the decisions affecting their medical coverage.
Legal advocates for patients' rights say that companies like Anthem Blue Cross benefit from exploiting that lack of a contract.
"This is a ploy on their part to say, 'You can't sue us,'" said Bryan Liang, executive director of the Institute of Health Law Studies at California Western School of Law in San Diego.
"Managed care companies have tried to absolve themselves of liability," he said. Liang said a state court in Pennsylvania and a federal court in Louisiana allowed enrollees to sue third-party administrators. The issues are being resolved in state courts because state employee benefits are not subject to a federal law that pre-empts local laws in other instances of insurance disputes.
Liang said he believed the California appeals court would seriously consider whether Anthem Blue Cross should be liable in bad faith cases because their contract with CalPERS directly affects enrolled patients.
Anthem Blue Cross, a subsidiary of Indianapolis-based Wellpoint Inc., is the only insurance company that administers CalPERS health benefits on behalf of the pension fund.
The issue of liability could gain extra traction as CalPERS considers whether to hire a single administrator to handle all of its health benefits. A decision is expected in 2009. Anthem Blue Cross is one of nine companies reportedly being considered for that massive task.
CalPERS spokeswoman Karen Perkins said the pension's board has not taken a position on the Mintz lawsuit or the issue of third-party administrators' legal liability. But Perkins said that patients are always given the option to appeal coverage denials.
To his death bed, David Mintz believed the health insurer never gave him the opportunity to appeal.
Appointed to the Los Angeles County Superior Court in 2000, Mintz enrolled in a CalPERS health benefits account soon after. He chose a PPO plan administered by Anthem Blue Cross, generally considered to be more flexible than an HMO plan. In November 2001, his doctors found a malignant tumor in Mintz's lung that they removed and for the next three years regular check-ups staved off further problems. Then in 2004, the cancer resurfaced and he underwent two more surgeries to remove sections of both lungs and received chemotherapy. By 2006, the tumors reappeared and Mintz sought out a specialist who suggested a procedure known as radio frequency ablation, an alternative to surgery that is combined with chemotherapy.
Anthem Blue Cross approved the procedure in a March 2006 letter, according to the complaint. Though the procedure failed to rid him of the tumors, Mintz planned to have a second round, on the advice of a doctor at UCLA who said it had a 70 percent chance of being effective, the complaint said.
But before his appointment, Mintz received a phone call from Blue Cross saying his insurance did not cover that type of procedure - even though the insurer had approved it the first time. On Oct. 19, an Anthem Blue Cross medical director sent a follow-up letter again denying the treatment because it was "investigational and not medically necessary." The letter said larger clinical studies were needed on the procedure.
Mintz chose not to go through with the procedure since his insurance would not pay for it, according to the complaint.
Jeffrey Ehrlich, a plaintiffs' lawyer based in Claremont who is assisting on the case, said Mintz was never informed of his right to fight the decision.
"He was entitled to be told that even though the plan was denying the care, he was entitled to get an independent medical review," Ehrlich said.
If the insurer is free to deny claims and duck liability when the patient objects, Ehrlich said, "It's a perfect world where the administrator is untouchable regardless of what they do."
