When Frank Wurzbacher’s oncologist prescribed monthly Lupron injections to prevent his prostate cancer from recurring, he had no idea the insurance barriers he would face.
His insurer initially covered 100 percent of the cost of the injections. But when the plan changed insurers, he was suddenly faced with $180 in cost-sharing for each one — an amount that he could not afford.
What the insurer would cover in full was castration surgery. After unsuccessful efforts to appeal the coverage determination, he followed his doctor’s advice and had the surgery on Sept. 18, 1995.
Upon his return from the hospital, he was notified that his insurer had reversed its decision — they would fully cover the injections after all. Way too late.
The problem was that his health plan was governed by the Employee Retirement Income Security Act of 1974 (ERISA), a law that was initially focused on addressing pension fraud and abuse, but which also regulates self-insured employer-sponsored insurance plans. This insurance arrangement was highly uncommon in 1974, but now 73 million Americans are enrolled in such plans.
This pronounced shift in reliance on ERISA is important because it benefits self-insured plans — and not the insurance holder (worker) — by protecting plans from legal liability amid wrongful coverage denials. It does this in two ways: It leaves attorney’s fee recovery to the discretion of the judge, and it denies legal recourse to denied patients because they can recover the benefit owed — that is, the treatment, minus any cost sharing — but not compensatory damages.
Thus, after the unnecessary castration surgery, Wurzbacher was not entitled to receive damages. All he was entitled to receive was the injections he no longer required.
There continue to be tragic tales like this three decades later, due to the same legal conditions.
Damages are important for two core reasons: compensation and accountability.
They compensate the plaintiff who has suffered a loss or injury due to the defendant’s conduct, helping to make the injured party whole. What’s more, damages are a crucial mechanism of accountability by establishing a concrete financial consequence of wrongful conduct (for example, a wrongful coverage denial). Thus, they can not only penalize bad conduct, but they can deter future misconduct.
The rational litigant model adopted by law professor Sean Farhang and others argues that plaintiffs will sue if the lawsuit has a positive expected value, which takes into account the expected benefit of suing, the probability of prevailing, and the costs of litigation.
ERISA lawsuits carry a low expected benefit because one can sue for treatment but not damages and remember, attorney’s fees come only at the judge’s discretion. So, with a notably low expected value of these suits, it is little wonder why there is limited litigation in this domain.
ERISA’s choice of design was not hugely consequential in 1974 when just 6 percent of Americans received health insurance through self-insured plans. However, with the subsequent growth of managed care and employers’ shifts toward self-insuring, such that now 63 percent of covered workers are in such plans, the story of ERISA is a study in the politics of unanticipated consequences.
The end result is that despite ostensibly being aimed at helping the American worker, ERISA renders this population vulnerable in ways that many don’t fully appreciate.
The implications of ERISA’s statutory design strike at the heart of recent discourse following the shocking murder of the CEO of UnitedHealth. Amid discussion of the horror of this event, many also have called attention to the widespread problems of coverage denials by private insurers and administrative burdens that make it challenging to navigate and access care in the American health care system.
In my research, I have characterized many of these insurance processes as “rationing care by inconvenience.” That is, in addition to issuing frequent coverage denials (whether through prior authorization or other mechanisms), insurers impose administrative barriers to accessing care, whether in getting a prior authorization approved or appealing a denial.
In turn, many patients forego medical care not due to final denial but due to accumulations of inconveniences. And like with so much of the American health care system, patients from marginalized groups are less able to weather those storms.
Congress sought to address these defects in 1997 with a Patients’ Bill of Rights, championed by the late Rep. John Dingell (D-Mich.), Sen. Tom Daschle (D-S.D.) and Sen. Ted Kennedy (D-Mass.), the latter of whom characterized the denial of damages as “indefensible” and a “license to maim and kill.”
Ultimately, the Patients’ Bill of Rights failed amid concerns about modest premium increases, frivolous lawsuits and the Clinton impeachment. But with even more businesses self-insuring in the past 25 years, the challenges of ERISA are now even more pronounced, and the appetite for health reform is quite strong as well given Americans’ low ratings of the health care system’s quality (31 percent according to Gallup).
The Republicans about to take control of the federal government historically have not endorsed large-scale efforts to expand coverage. However, research shows that working toward a new Patients’ Bill of Rights — while restoring the private insurance structure with which Americans are familiar — is a tangible solution to a more workable system in which patients can access their prescribed, medically necessary care.
Reform didn’t come in time for Frank Wurzbacher, but it might help to prevent future tragedies.
Miranda Yaver is an assistant professor of Health Policy and Management at the University of Pittsburgh, where she holds a secondary appointment in the Department of Political Science.
