March 11 2002

Patients should have the right to forgo arbitration in health care disputes and file lawsuits directly in court, the nation's largest arbitration provider plans to tell California lawmakers Tuesday.

The American Arbitration Assn. will no longer allow its arbitrators to handle health care cases unless both sides voluntarily agree to the out-of-court process, said Senior Vice President Robert E. Meade.

The group's move, officials and lawmakers say, will put pressure on California doctors, hospitals and health plans to stop forcing patients into arbitration. In many states, laws prohibit mandatory arbitration clauses, which are signed as a condition of joining a health plan or seeking care from a medical provider.

Such clauses are unfair when the problem involves health care, Meade said. He plans to explain the group's policy change at a Tuesday hearing of the Assembly Judiciary Committee.

"Nothing is more emotional or personal or devastating than a health care problem," Meade said. "If you buy a lemon car, it's not life or death. It's not a medical problem. That's what puts this on a higher playing field."

Some legislators and consumer advocates praised the move.

"It's a significant development," said Assemblyman Darrell Steinberg (D-Sacramento), chairman of the Assembly Judiciary Committee.

"AAA's announcement is a very positive sign that they recognize there are issues, especially when it comes to people who are forced into the system, as opposed to voluntarily agreeing to enter the system."

For the past year, Steinberg's committee has been placing pressure on arbitration groups to change their practices to make arbitration more fair to consumers.

"This is really a very big political trump card to move the issue forward after years of being rebuffed by HMO lobbyists," said Jamie Court, director of the Foundation for Taxpayer and Consumer Rights and a frequent HMO critic. "This is proof positive that it's unethical medically and legally to force patients into a secret process that's stacked against them."

The vast majority of California health maintenance organizations, as well as many other medical providers, require consumers to submit their grievances to arbitration rather than filing lawsuits. They say the out-of-court process is speedier, less contentious and not subject to the variability of juries.

The association handled more than 200,000 disputes last year, but only 16 of those involved health care. Still, its stance is often sought in national policy debates about out-of-court dispute resolution.

In 1997, the group formed a task force with the American Bar Assn. and the American Medical Assn. to examine health care arbitration. The task force concluded in July 1998 that such cases should only be sent to arbitration if the patient voluntarily agrees after a dispute occurs.

But the arbitration group didn't implement the recommendation until last week, Meade said. "This is going to send waves," he predicted.

Officials at Kaiser Permanente, the state's largest HMO, say criticism of mandatory arbitration is misplaced. If consumers are allowed to choose which forum to take their disputes, they will select the venue that is likely to award them the most money, said Michael Hawkins, Kaiser's legislative representative and senior counsel.

"Reasonable people disagree about the issue of voluntariness," Hawkins said. "A mandatory system is the only system that we believe that we can manage."

From March 1999 to December 2000, Kaiser received 1,716 arbitration requests from its 6 million California members. (Kaiser handles far more cases than other HMOs because it is closely tied to its doctors and hospitals and pays their legal claims, while other HMOs do not.)

Still unclear is whether the new policy will apply to medical malpractice cases. About 95% of Kaiser's arbitrations fall into that category, Hawkins said.

The California Supreme Court, ruled in July 1997 that Kaiser's system was deceptive to consumers by promising fairness but not providing it. Kaiser gave up direct oversight of the system to an outside law office the following year, and officials claim that the new process is a model for others.

"We think that we have a mandatory system that does not disadvantage the enrollees that use that process to resolve disputes," Hawkins said.

Arbitration for HMO patients has been under fire in other circles as well.

Earlier this year, Daniel Zingale, director of the California Department of Managed Health Care, said the current system probably favors HMOs over patients. He has asked insurers to provide more information on arbitration verdicts to his office so regulators can study whether changes need to be made.

Still, Gov. Gray Davis has not taken a position on whether all HMO arbitrations should be voluntary, Zingale said. "We've clearly identified reasons for concern in the system," he said.

The state Senate last year passed a bill that would allow patients to bypass arbitration if they sue their HMOs under the state's patient protection law. The Assembly has not acted yet on that bill, sponsored by Sen. Martha Escutia (D-Whittier).

Drew Liebert, chief counsel for the Assembly Judiciary Committee, said the arbitration group's move is a watershed event.

"We think it's hopefully going to be the first brick falling from the wall that takes down the whole scheme of forced arbitration on consumers and patients and employees," he said. "The wall is going to fall down now, it's just a matter of time."