Jury Returns Record Award Against HMO

In the nation’s largest judgment ever against an HMO, a San Bernardino jury Wednesday awarded $116 million in punitive damages to a Yucaipa widow whose husband fought fruitlessly until his death against Aetna U.S. Health Care of California for coverage of experimental cancer treatment.

The verdict against a subsidiary of the country’s largest HMO was described by consumer advocates and legislators as a clear signal of the public’s anger at health maintenance organizations. The decision is expected to fuel the already heated political debate over whether far more patients ought to be able to sue health insurers.

The jury last week had awarded Yucaipa schoolteacher Teresa Goodrich $4.5 million in damages for medical expenses and loss of companionship, concluding that Aetna shortened her husband’s life. The punitive award, which stemmed from the jury’s finding of “malice, oppression and fraud,” brings the total value of the verdict to more than $120 million.

That is more than $30 million higher than the previous record for a verdict against HMOs--awarded in Riverside County against HealthNet in 1993.

“I think the meaning of this verdict is that people are just plain mad,” said Michael J. Bidart, the attorney who represented Goodrich and who urged the jury in closing arguments to send a loud warning to the HMO industry.

“People are just turned off. . . . The HMOs are corporate executives practicing medicine where profit is the motive, not the best interest of the patients.”

Aetna officials abruptly left the courtroom Wednesday, later releasing a statement stating that they will “vigorously appeal” the decision.

“The death of David Goodrich was truly a tragedy for all close to him,” the company wrote. “We believe we acted fairly at all times in this matter. However, we believe the rulings of the court prevented the jury from hearing critical facts. . . . Had these facts been known, we are confident the outcome would have been different.”

During the trial, Aetna attorneys had faulted the patient, David Goodrich, 44, for seeking treatment outside the Aetna plan without first getting Aetna’s approval. They said network doctors could have treated the cancer, but also conceded that they were “inexperienced” with Goodrich’s rare type of stomach cancer.

In their statement, Aetna officials again claimed that Goodrich had not made proper use of his benefits, including the offer of a “nurse case manager” and grievance procedures. Aetna also denied that it had contributed to the shortening of Goodrich’s life.

In addition, Aetna said it had implemented some new policies since Goodrich’s case arose that allow all HMO members to have access to “external review,” in which an independent physician reviews their case.

Without commenting on the Goodrich case, Walter Zelman, president of the California Assn. of Health Plans, said Wednesday that recent reforms in California may “prevent these kinds of tragedies.” He cited a new law requiring external review of experimental treatment decisions.

Verdict Expected to Have Broad Impact

Though the Goodrich award may be cut in the appeals process, several lawyers and health industry watchers say it will nonetheless send shock waves through the insurance and managed care industries. Meanwhile, one knowledgeable source said the award will accrue $1 million a month in interest.

Mark Hiepler, the attorney who won the 1993 HealthNet case--filed on behalf of a sister who died of breast cancer--said that this is the only kind of message that health insurers are sure to heed.

“Money matters more than medicine to them until they get hit with these types of verdicts that will change their behavior,” said Hiepler, who settled the case for an undisclosed sum after it was appealed.

Teresa Goodrich called the award in her husband’s case Wednesday a “beautiful” decision.

“What they [Aetna officials] have to realize is that a sick person takes all their energy to fight the illness,” she said. “It’s a shame when you have to fight the health care provider too.”

After reporting their verdict, several jurors were in tears. The jury foreman, Theo Dennison, rushed to hug Teresa Goodrich, saying, “I hope we did good by you.”

Said juror Maria Almirol: “Justice was done. We just did what we thought was right. We all wanted to send a message that everybody deserves to be treated fairly, especially when they are sick.”

The case represented an unusual opportunity to take on a health insurer in court and recover substantial damages. Because of a federal law governing employee benefits--a law critics are seeking to amend--nearly 125 million Americans with employer-based health insurance are largely precluded from recovering damages from their insurers, including HMOs, for denial of treatment resulting in death, injury or economic loss.

The law, the Employee Retirement Income Security Act, known as ERISA, allows people to recover only the value of the benefits they were entitled to in the first place--for example, the cost of a cancer treatment. Many patients have trouble finding lawyers to take such cases because the potential awards are not enough to justify the expense of a lawsuit.

But ERISA does not apply to government and church employees or those who buy insurance directly (not through their employer).

David Goodrich worked for San Bernardino County as a deputy district attorney. For that reason, his wife had unusual latitude to hold Aetna legally accountable for its treatment of her husband.

Her attorney, Bidart, who went to law school with David Goodrich, argued during the two-month trial that Aetna had for 2 1/2 years delayed and denied approval for treatment of Goodrich’s rare cancer. Bidart said that even Goodrich’s doctors agreed he needed to be treated outside the Aetna network, but Aetna balked.

When Goodrich finally did receive treatment, Aetna refused to pay for it, Bidart said.

“He died thinking he was leaving his wife with three-quarters of a million dollars in medical bills,” Bidart said. Consumer advocates and legislators predicted that the case will draw immediate attention in Sacramento and Washington. What it shows, reform-minded lawmakers say, is that the legal system is not fair to most insured Americans.

“Most people do not have the same options that this patient did,” said state Sen. Liz Figueroa (D--Fremont), who has introduced a bill in California designed to get around federal restrictions and allow more lawsuits against insurers.

Martin Gallegos, the Baldwin Park Democrat who chairs the Assembly Health Committee, agreed, saying legislation is essential to create a “fair playing field” for all health care consumers.

Legislation is also pending on the federal level, where Senate Democrats favor a right to sue for damages, as well as a right to external review, while Republicans favor an external appeals process only.