Supreme Court ruling windfall for HMOs may be short-lived.

The June 21 U.S. Supreme Court decision barring patients from suing their HMOs in state court over denied benefits is seen as a significant victory for health insurers. It shields them from paying massive, multimillion-dollar awards to patients who claim the), have been harmed by coverage decisions.

But as for a tangible financial benefit to the industry? Not much, according to several experts, who note that health insurers are still vulnerable through other sorts of lawsuits, not to mention a renewed effort on Capitol Hill to pass a patients'-bill-of-rights measure this year that would essentially undo the high court's decision.

"The main benefit is eliminating what was hanging over them. If the Supreme Court didn't rule the way they thought, they could be liable for some pretty hefty punitive awards," said Kenneth A. Frino, vice president of the life/health division for A.M. Best Co. "But as far as changes in pricing, or changes in profitability, not much should change."

That relief, meanwhile, is threatened by a bipartisan effort to pass a bill undoing the Supreme Court ruling and allowing patients to sue in state courts after all.

Democrats very nearly passed such a bill in 2001. Sen. John McCain, R-Ariz., and Sen. John Edwards, D-N.C., announced a new version of that bill on June 23, which is gathering bipartisan support. The bill would explicitly allow patients to sue their HMOs for negligence and allow them to recover unlimited damages for economic loss and pain and suffering.

The senators involved say that the Supreme Court decision renders patients without adequate legal recourse if their HMOs deny them coverage which causes them injury. The nonpartisan Institutes of Medicine meanwhile says there are an estimated 40,000 to 98,000 deaths each year caused by medical errors, and that the number is likely underestimated.

Wall Street analysts, health-care lobbyists and the insurance companies themselves have all been unwilling to comment or speculate on the legislation. Several stock analysts said the court ruling could reignite the debate over a patients'-bill-of-rights measure; since that has come to pass, however, those analysts have declined to comment.

Edwards spokesman Mike Briggs noted that the bill earlier passed the Senate on a 59 to 36 vote, which is one vote shy of being filibuster-proof. The current measure is essentially the same, Briggs said, "with only a few minor tweaks here and there."

The Congressional Budget Office has reported that letting patients sue their health plans would increase health insurance premiums by an average of 4.2% per policyholder, or about $100 per person per year.

The high court's unanimous ruling in June means that no one can sue an HMO for damages when an insurer denies treatment, even if the insurer's decision is tantamount to a medical decision. Instead, patients can recover the monetary cost of the treatment they were denied, no matter the degree of injury they may have suffered.

That effect comes about because the high court found that state patient-protection laws are superseded by ERISA, the 1974 Employee Retirement Income Security Act, which regulates employee benefit plans and ensures that regulation is uniform. Because the court found that ERISA, not state law, applies, HMOs can be sued only in federal court, and then only for failing to adhere to their contracts.

The Texas law under which the Supreme Court case arose allowed patients to sue for failing to exercise ordinary care when making health treatment decisions.

Hartford, Conn.-based Aetna and Philadelphia-based Cigna both issued statements saying they were pleased by the decision and the court's reaffirmation of ERISA's applicability to employer health benefits.

Aetna said that "the court has helped to assure that millions of working Americans will continue to have access to quality health coverage provided by their employers." Cigna said its coverage appeals process involves the use of independent external reviewers whose decisions are binding on Cigna.

RELATED ARTICLE: Key events leading to court's HMO ruling.

* 1997: Texas passes the Health Care Liability Act This Texas state law allowed consumers to sue their HMOs in state court when they suffered harm due to negligence by their HMO. Aetna sued the state of Texas to prevent the THCLA from taking effect.

* 2000: The 5th U.S. District Court of Appeals in New Orleans upholds the right of consumers to sue their HMOs in response to Aetna's suit against the THCLA.

* 2000: Two separate Texas state lawsuits are filed alleging Aetna and Cigna, respectively, refused to cover certain medical services in violation of the THCLA. The insurers argued that the Employee Retirement Income Security Act, as a federal statute, supersedes the THCLA, which would have shielded them from the lawsuits in the first place. This argument sent the case to federal district courts for review. The district court ruled it was an ERISA issue and dismissed the suits after the plaintiffs refused to amend their cases to fully fit within the ERISA.

* 2001: U.S. Court of Appeals for the 7th Circuit in Chicago declares that the federal ERISA does not pre-empt Illinois state law requiring an HMO to submit to an independent review panel for arbitration over a disputed claim denial.

* 2001: Congressional Democrats try to establish a bill granting people the right to sue their HMOs over denied payments or services. The bill was eventually squashed by President Bush, congressional Republicans and the insurance industry.

* 2004: The Supreme Court hands down the decision that patients cannot sue HMOs in state court, resolving the issue which began about seven years ago in Texas.

Compiled by Vanessa Morogiello.

Sources: The U.S. Department of Labor, BestWeek and The New York Times.