Score One for Michael Moore

Medical insurers can no longer say that some sorts of unpaid insurance claims are the Federal government’s responsibility. On August 31, the Texas Supreme Court ruled that five Texas hospitals can sue health care benefits provider Aetna Inc. directly without having to go through a complicated appeals process.

The hospitals - Christus Health Gulf Coast, Christus Health Southeast Texas, Gulf Coast Division Inc., Memorial Hermann Hospital System, and Baptist Hospitals of Southeast Texas – claimed Aetna had attempted to avoid being sued under state law by using the Federal Medicare Act as a shield. The hospitals did not have a contract with Aetna, but with North American Medical Management of Texas. However, Aetna’s wholly-owned subsidiary NYLCare paid NAMM to provide healthcare under the Medicare+Choice program.

When NAMM was placed into supervision conservatorship by the Texas Department of Insurance in August 2000, they were alleged to have underpaid on 6,000 individual claims for a total of $14 million. The five hospitals sued Aetna in Harris County, arguing that, under the Texas Insurance Code, Aetna was liable for NAMM’s underpayment. Aetna argued that the hospitals would have to appeal each claim fully through the federal administrative system. Initially, the Harris trial court and the Court of Appeals both dismissed the lawsuit, finding they had no jurisdiction. Describing those judgments as turning the Medicare administrative system into a “de facto claims administrator”, the Supreme Court overturned them and returned the case to the trial court.