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Healthcare Leadership Council

 September 17, 1999HI

September 17, 1999

Liability  Expansion Wrong Way to Go

The so-called "Consensus Managed Care Improvement Act," H.R. 2723, would expand the legal liability of all employers who retain any discretion over the employee health benefits they offer.

    •  Increasing exposure to costly liability lawsuits will hurt Americans who today have health benefits.  They'll face higher health premiums, possible loss of coverage and lower quality.  Only plaintiffs' lawyers will benefit from this expansion of liability.

    •  Bill proponents say it has an exception to protect employers from liability.  But an analysis by the law firm of Schnader, Harrison, Segal & Lewis identifies an exception to the exception.  The "Exception for Employers and Other Plan Sponsors," which purportedly shield employers against the liability expansion, is trumped by a "Special Rule."  The "Special Rule" invokes liability when an employer retains "discretion" to help resolve benefits claims.  The bill gives little protection against punitive damages awards.  In other words, there's effectively no employer carve-out.

    •  The Schnader, Harrison analysis concludes: [T]he Dingell-Norwood bill would dramatically change the way that group health benefits claims are litigated in the United States.  State personal injury law would come to dominate virtually all aspects of managed care.  Employers would be subject to state law causes of action, replete with jury trials, extra-contractual damages and punitive damages.  It would be an entirely new day in this aspect of employee benefits law.  Anyone who claims the contrary is simply failing to comprehend the thrust of the legislation."

    •  With increased liability exposure, 57 percent of small employers would likely stop offering health benefits altogether, according to a survey.  Translation: Many working Americans who now have health coverage would become uninsured.

Expanding legal liability would go in completely the wrong direction at a time in which increasing access to health care should be a priority.

    •  At a minimum, the Dingell-Norwood liability provisions would result in higher health costs and thus many more Americans joining the 43 million uninsured population.

    •  More than likely, many employers on the margins could no longer afford the costs of offering health benefits.  Many more could not afford the risk of defending against a liability lawsuit, particularly in the high-stakes state court venues where juries dish out a bonanza of awards.

    •  Higher costs and increased liability exposure would lead to perhaps millions more uninsured Americans and millions more families paying even more for their health coverage.

    •  And virtually everyone with health coverage would receive government-micromanaged, lower quality care because the bill's mandates would freeze into place today's standards and freeze out tomorrow's improvements that come from innovation.

Those who care about health costs and the uninsured should oppose expanded legal liability and oppose the Dingell-Norwood bill.  There's no "consensus" to the so-called consensus bill.


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