Insurers Fear Cost of Patients' Rights.

Revised legislation creates opportunities for lawsuits, industry representatives say; insurers balk at being auto safety watchdogs.

Representatives for insurers and employers said they would see more lawsuits costing more money if a new patients' bill of rights introduced in the U.S. Senate becomes law.

The bill--introduced Feb. 6 by Sens. John McCain, R-Ariz., and Edward Kennedy, D-Mass.--is seen by opponents as worse than previous patients' rights legislation.

Versions of a patients' rights bill had passed both the House and Senate in 1999, with the significant and dividing issue being patients' right to sue their health plans.

Although their bill includes a right to sue, McCain and Kennedy have touted it as a compromise, citing the limit of $5 million on punitive damages in federal lawsuits.

"It might be a compromise amongst themselves, but it's not something that's likely to be a foundation for a serious discussion about patient protection," said Phil Blando, a spokesman for the American Association of Health Plans.

Here are some of the problems insurers and employers see with the legislation:

* Federal lawsuits would be allowed when the suit involves plan administrative issues or how to interpret a contract--such as whether a particular benefit is covered under a plan.

* Lawsuits in state court would be allowed for medical decisions without a cap on damages.

* Lawsuits would be allowed even after an independent, third-party review settles a dispute.

* Employers could be held liable for plan-administration decisions.

These provisions would allow "forum shopping" by attorneys looking for courts that could offer the best results, said Paul Dennett, vice president of health policy at the American Benefits Council, formerly known as the Association of Private Pension and Welfare Plans. In certain instances, they would allow plaintiffs' attorneys to sue in both federal and state courts for the same claim, he said.

With greater liability exposure than now exists and no clear protection for employers from that liability, this legislation could be a "deal breaker" for some employers, Dennett said, because it would lead to even higher health insurance premiums. "This could be the additional increase they can't justify," he said.

Dan Danner, chairman of the Health Benefits Coalition, warned that the legislation could result in fewer employers offering health insurance to their employees. The fear of a lawsuit might be enough to discourage employers, Danner said in a statement. "More Americans will join the ranks of the 43 million adults and children who currently have no health insurance," he said.

The bill also would affect workers' compensation, said Barbara Levering of the American Insurance Association.

Whether President Bush will ultimately support this legislation isn't clear. "Given the discussions he's had during the campaign and statements made by his secretary, we would consider it highly unlikely that he would embrace this type of approach," Blando said.

Insurers Tell NHTSA to Go Elsewhere For Early Warning on Auto Defects

A group of insurance associations have told the National Highway Traffic Safety Administration the insurance industry doesn't maintain the type of information that would be useful in establishing an early-warning detection system for vehicle defects.

Now the industry is hoping to convey the same message to Congress in a report due March 1, said Melissa Shelk, vice president of federal affairs for the American Insurance Association.

The AIA, the Alliance of American Insurers, the National Association of Independent Insurers and the National Association of Mutual Insurance Companies told NHTSA in a joint letter that even though they "collectively represent virtually the entire passenger automobile insurance industry," it is vehicle and component manufacturers who are best suited for collecting and reporting information to identify safety-related defects early.

The insurance industry's business is to underwrite policies and to pay legitimate claims when they occur regardless of whether there is a product defect, according to the letter. The industry receives almost 50 million auto claims a year, and insurers do not routinely conduct investigations to determine if accidents are due to product defects.

The insurance associations also cited privacy concerns over providing NHTSA with individually identifiable personal information, including names, addresses and telephone numbers of policyholders. Under its contracts with policyholders, insurers are restricted from sharing policyholder information with outside parties.

The letter was in response to last year's legislation, Transportation Recall Enhancement, Accountability and Documentation Act, which called for a feasibility study on safety-related data that Congress and others thought might be available from the insurance industry.

Legislators began focusing on vehicle defects in August, when Bridgestone/Firestone announced its recall of more than 6 million tires. The recall came after the federal agency began investigating deaths blamed on deteriorating tires.

Dennis Kelly is Washington bureau manager