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In a case that will have a huge and immediate impact on the way auto accident cases are litigated, the Pennsylvania Supreme Court heard oral arguments last week on the issue of whether HMOs have the right under Pennsylvania law to assert a subrogation claim against an accident victim’s tort recovery. In Wirth v. Aetna U.S. Health Care, the justices agreed to answer a certified question from the 3rd U.S. Circuit Court of Appeals. Both sides insist that Pennsylvania law is clearly on their side. The plaintiffs argue that they shouldn’t be forced to dip into their settlements or verdicts to reimburse the insurers for any medical bills because the Pennsylvania Motor Vehicle Financial Responsibility Law prohibits subrogation in all auto accident cases. But the HMOs argue that Pennsylvania’s HMO Act makes them exempt from MVFRL’s anti-subrogation provision. Early on in the oral argument, Chief Justice Ralph J. Cappy explained that the court was faced with a clear conflict between two statutes and asked: “Which should trump?” Attorney Ronald J. Smolow of Smolow & Landis in Trevose, Pa., insisted that MVFRL’s anti-subrogation clause — § 1720 — should trump the HMO Act because the Legislature used specific phrases that directly refer to HMOs. Smolow argued that § 1720 does not generally refer to “insurance,” but instead specifically applies to any “program, group contract or other arrangement.” As a result, Smolow said, the courts should consider § 1720 to be “sweeping in scope” and to apply to “every conceivable” type of insurance. If HMOs are exempted, Smolow said, plaintiffs in auto accident cases will be forced to use their awards for pain and suffering to reimburse their insurers. But Aetna’s lawyer, Raymond J. Quaglia of Ballard Spahr Andrews & Ingersoll, argued that the true trump card in the court’s analysis should be the language in the HMO Act that grants HMOs exemption from all laws that regulate insurance unless the Legislature includes HMOs in the law “specifically and in exact terms.” Quaglia argued that since § 1720 was passed long after the HMO Act, the Legislature’s failure to specifically name HMOs in § 1720 — despite knowing of the requirement to do so set forth in § 1560(a) of the HMO Act — is significant. The court, Quaglia said, “doesn’t need to speculate” about whether the Legislature intended to include HMOs in § 1720 because the lawmakers have passed “scores” of laws over the years in which they showed that they know how to include HMOs when they intend to. Justice Ronald D. Castille interrupted and asked Quaglia what the court should infer from § 1720′s use of the term “group contract.” “To me, an HMO is a group contract,” Castille said. Quaglia disagreed, saying “all HMOs are group contracts, but not all group contracts are HMOs.” In passing the HMO Act, Quaglia said, the Legislature was setting out to encourage the formation of HMOs. Their proliferation over the past three decades, he said, only proves that the law has “achieved its purpose.” But attorney Scott B. Cooper of Schmidt Ronca & Kramer in Harrisburg, Pa., who joined Smolow in arguing for the plaintiffs, said the HMO Act must be viewed in context. At the time the law was passed, Cooper said, HMOs were nonprofit organizations and their formation was designed to extend health coverage to thousands of uninsured and indigent citizens. Since then, Cooper said, HMOs have “started becoming corporations” and now account for about half of the health insurance policies in Pennsylvania. The purpose of § 1720, Cooper said, was to rein in the rising cost of auto insurance by shifting the cost of accident-related medical coverage from auto insurers to health insurers. As a result, he said, it makes no sense to hold HMOs exempt from the anti-subrogation provisions. The Wirth case is one of two class action suits against Aetna that challenge its practice of asserting liens against the tort recoveries for the medical benefits it has provided to auto accident victims. So far, Aetna has been winning nearly every battle. Smolow originally filed both suits in the Bucks County Court of Common Pleas, but Aetna removed the cases to federal court on the grounds that they were pre-empted by the Employee Retirement Income Security Act. One of the cases, Nott v. Aetna U.S. Health Care, was sent back to Bucks County when U.S. District Judge Timothy J. Savage ruled that the federal law at issue — the Medicare Act — does not “completely pre-empt” the MVFRL. The Wirth case, however, remained in federal court when U.S. District Judge Harvey Bartle III agreed with Aetna that it was governed by ERISA. Since the proposed class of plaintiffs in Wirth were insured by Aetna through their employers — which was not the case in Nott — Bartle found that ERISA completely pre-empted the plaintiffs’ state law claims. Bartle later granted summary judgment in Aetna’s favor, holding that the HMO Act, passed in 1972, effectively exempted HMOs from all state insurance laws then in existence as well as future insurance laws — unless they specifically apply to HMOs. Bartle found that since MVFRL was passed later, and since it does not specifically reference HMOs in the section that prohibits subrogation, HMOs are exempt. Six months later, Aetna won again when Bucks County Judge Robert J. Mellon issued a decision that mirrored Bartle’s. The Nott case is currently pending before the Pennsylvania Superior Court, but the Wirth case made its way to the state Supreme Court more quickly when the 3rd Circuit found that the case hinged on an apparent conflict in the two Pennsylvania statutes that ought to be resolved first by the Pennsylvania courts. “The seemingly incongruous Pennsylvania statutory provisions before us implicate an issue of substantial public importance heretofore unresolved,” U.S. Circuit Judge Marjorie O. Rendell wrote in an opinion joined by Chief Judge Anthony J. Scirica and D. Michael Fisher. Rendell noted that MVFRL’s anti-subrogation provision, § 1720, if read alone, would “clearly bar Aetna’s claim.” But Rendell noted that § 1560(a) of the HMO Act exempts HMOs from any state law that regulates insurance “unless such law specifically and in exact terms applies to such health maintenance organization.” As a result, Rendell found there were “serious questions concerning the applicability of Section 1720 to Aetna, an HMO.”

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