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Get Your Claim Paid: The Mechanics of HMO Claim Settlements

Most HMO disputes are handled -- at least initially -- by arbitration. The arbitration body is paid a daily rate that typically ranges from $750 to $1,200, with the process itself usually lasting from one to three days. All parties agree to abide by the decision instead of litigating.

But patients-rights advocates contend that many times, consumers don't even realize that they've locked themselves into arbitration. And increasingly, the courts have shown that they, too, are concerned about the fairness of forced arbitration in managed care contracts.

"When it comes to negotiating an agreement, individual consumers are not in the same place as large health plans" and often simply swallow whatever is written into a standard contract, says Peter Lee, an attorney and director of consumer-protection programs at the Los Angeles-based Center for Health Care Rights.

So, he explains, the courts and others are now looking for ways "to have those scales more balanced."

In June 1997, in a case involving Kaiser Permanente, the state Supreme Court ruled 6-1 that HMO members can file lawsuits if they demonstrate that their health plan's arbitration system is unfair. In a blistering decision, the court attacked Kaiser for intentionally delaying the selection of arbitrators and otherwise manipulating the process for its benefit.

Among other things, the court pointed to one of Kaiser's own surveys, which showed that in the mid-1980s, an arbitrator wasn't appointed for an average of 674 days -- almost two years after the enrollee had asked for one. In its contracts, Kaiser had promised to name an arbitrator within 60 days of a patient's demand.

In response to the ruling, Kaiser earlier this year announced an overhaul of its arbitration system. The company, which for more than two decades had operated an in-house arbitration process, began using an independent system like those used by competing health plans. Kaiser is the state's largest HMO, with more than five million members.

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