Merritt Personal Lines Manual: Alleged HMO Delay Tactics

In 1998, New York's Empire Blue Cross and Blue Shield was accused in a class-action lawsuit of deliberately delaying and refusing to pay valid claims by policyholders.

The suit was filed by a former Nynex employee who lived in Massachusetts. In the suit, the man claimed he was forced into bankruptcy by Empire's alleged tardiness. Empire denied the charges.

In California, managed care health plans, which were battered in the court of public opinion, have lost ground in the court of legal opinion as well.

Several key judicial rulings during the late 1990s -- coupled with state law and heightened scrutiny of health insurance companies by the chief justice of the California Supreme Court -- promise to provide patients with significant new ammunition when they wind up in disputes with their HMOs.

Some of these developments have gained considerable attention. Others have gone more unnoticed. When taken together, experts say, they mark an unmistakable power shift in favor of consumers in the continuing struggle to sort out a critical question: Does the playing field need to be leveled when patients battle their health plans over denied benefits?

"The pendulum has reached its peak and is swinging back in the other direction in favor of the insured," said Jay Taylor, a Los Angeles attorney who won a major court ruling that bolstered the rights of plan members.

Taylor's victory came when California's Second District Court of Appeals ruled that he could proceed with his efforts to establish a class-action arbitration against Blue Cross of California. The insurance company -- a unit of Wellpoint Health Networks Inc. -- had argued that it should be able to handle disputes one at a time and not have to face a larger group of patients who had banded together.

Under the arbitration system, conflicts that arose between the patient and the health plan were taken to an individual or panel of arbitrators for binding resolution. The court's decision was important because it allowed many more health plan enrollees to pool their resources for what might have otherwise been prohibitively expensive arbitration proceedings.