NCPA - National Center for Policy Analysis

Employers' Liability Under Texas Law Limited

March 3, 2000

Congressional conferees are meeting to iron out differences between the Senate and House versions of a so-called "patients' bill of rights" (H.R. 2990 and S. 1344). Among other issues, the conferees are weighing the merits of allowing expanded litigation against employment-based health insurance plans.

Supporters of expanding the right to sue health plans have pointed to experience with a law in Texas that expanded liability for health plans. Only a handful of lawsuits have been filed since that law took effect in 1997, suggesting to some that expanded liability will not cause health insurance premiums to rise due to increased litigation costs.

  • However, analysts point out that the Texas law is very different from the proposed federal law because it specifically exempts employers from any liability in all cases.
  • Under the Norwood-Dingell bill, the version of patient protection passed by the House of Representatives, employers would be subject to liability if an employer "exercise(s)...discretionary authority to make a decision on a claim for benefits."
  • Since the courts have not made clear what constitutes "discretionary authority," employers would be at the mercy of imaginative plaintiff lawyers and courts.

Insurers opposed to expanded liability say premiums will increase, and some employers will drop health insurance benefits altogether, if the federal law is too expansive.

Source: James R. Frogue, "Why The Texas HMO Liability Law Is Not A Proven Model For Congress," Executive Memorandum No. 658, March 3, 2000, Heritage Foundation.


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