Finance, providers issue brief: insurer liability

Area of Science:

• Health Law
• Medical Malpractice
• Insurance Regulation

Background:

• Managed care organizations (MCOs) increasingly deny payment for procedures and physician-ordered referrals, citing medical necessity.
• Patients and physicians are pressuring states to curb MCO power and enhance patient protections.
• Traditional legal protections shield health insurers from direct liability for medical malpractice.

Purpose of the Study:

• To examine the legal and legislative shifts regarding health plan liability for medical malpractice.
• To analyze the implications of extending malpractice liability to insurance carriers and plans.
• To understand the evolving landscape of managed care regulation in response to patient and physician concerns.

Main Methods:

• Analysis of legislative trends and debates in 29 states in 1998 and at least 35 states currently.
• Review of existing state laws prohibiting the corporate practice of medicine.
• Examination of the legal theory of vicarious liability in the context of health insurance.

Main Results:

• A significant number of states are actively considering legislation to address health plan liability.
• There is a growing movement to extend malpractice liability beyond individual practitioners to insurance entities.
• The traditional defense of 'corporate practice of medicine' is being challenged.

Conclusions:

• State legislatures are grappling with how to hold health plans accountable when their decisions lead to patient harm.
• The scope of medical malpractice liability is expanding to potentially include insurance carriers and managed care plans.
• These legislative changes reflect a response to concerns about the power and practices of the managed care industry.