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HMOs win as court tosses out lawsuit

After a flurry of potential class action lawsuits were filed against HMOs in the past few months, Aetna, Kaiser, and other health plans were no doubt in a better mood after winning a key appeal to toss out a lawsuit against five of their own.

The victory means HMOs don't have to reveal to consumers how they compensate doctors for making treatment decisions. Several lawsuits that are still pending, including those filed by the so-called "Repair Team," contend that doctors are paid bonuses for rationing treatment because of costs.

"This decision is yet another blow to the viability of the recent class actions brought against HMOs."

The U.S. Court of Appeals for the Fifth Circuit in New Orleans on Jan. 4 upheld a federal judge's decision to dismiss a lawsuit that had been filed against five Texas HMOs: Aetna U.S. Healthcare; CIGNA Healthcare of Texas; Kaiser Foundation Health Plan of Texas; NYLCare of Texas; and Prudential HealthCare Plan.

The lawsuit accused the health plans of violating the federal Employee Retirement Security Income Act (ERISA) by refusing to disclose their financial reimbursement arrangements with doctors in their networks. ERISA governs employer-sponsored health plans. The plaintiffs argued that ERISA language saying that health plans are required to act "solely in the interests of plan participants and beneficiaries" obligates HMOs to reveal those arrangements.

The appeals court, however, says the issue is a matter for Congress, not the courts. "It is for Congress to determine whether to impose such a duty to disclose under ERISA and this court will not encroach on that authority by imposing a duty which Congress has not chosen to impose," the court wrote in its opinion.

Aetna was among those applauding the decision. "This federal appellate decision rejecting a failure to disclose theory is yet another blow to the viability of the recent class actions brought against HMOs," says David F. Simon, Aetna's chief legal officer.

The decision might not spell the end of the matter, though. An attorney for the plaintiffs says he might refile the lawsuit citing a different law.

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