MOUNDSVILLE - Susan DeGarmo, who stands a commanding 6-foot-2,with broad shoulders and a full head of red-blond hair, is clearlyno one to be trifled with. But she almost met her match in herfamily's health maintenance organization.
After her son was paralyzed from the waist down when a pickuptruck ran over his bicycle, she won nearly $1 million from thenegligent driver - only to have her HMO demand nearly 25 percent ofher take.
When she refused to pay, the HMO sued. DeGarmo countersued. Afterfive bitter years, she prevailed.
'What they were doing infuriated me,' DeGarmo said. 'Stephen wonthis minimal amount of money that he's going to need to take care ofhimself for the rest of his life ... and they were trying to take itaway.'
As HMOs resort to increasingly aggressive business practices inthe face of ever-shrinking profit margins, consumers at both thelocal and the national levels are banding together to challengethem. DeGarmo's saga and others like it offer a glimpse of what liesahead in the bigger class-action lawsuits filed recently againstsuch health care giants as Aetna U.S. Healthcare and Humana Inc.
Particularly upsetting to DeGarmo was that she had believedpeople bought insurance so that someone else would assume the riskof large medical bills. Why should she have to pay for her son'smedical costs out of the award, which was designed primarily tocompensate him for future economic losses and pain and suffering?
Then she discovered something few consumers know: Buried deep inthe fine print of most insurance contracts is language givinginsurers the right to a share of damage awards.
Stymied by that provision, DeGarmo and her lawyer began toscrutinize the HMO's recovery practices. What they found was thatHealth Plan of the Upper Ohio Valley actually had ordered her to payback more than the HMO had spent for Stephen's care. That businesspractice became the heart of her challenge in state court.
Consumers in some other parts of the country, however, have hadless success in taking on their HMOs for the same practice.
In a Minnesota case, the 8th U.S. Circuit Court of Appeals ruledagainst consumers. And in California, state courts have upheld theright of HMOs to recover more than they've paid.
In the larger class-action suits recently filed against theindustry giants, plaintiffs and their lawyers are questioning otherwidespread HMO practices, such as paying bonuses to doctors who cutdown on costly patient treatments, mandating that patients useprescription drugs on a limited list even when their doctorrecommends an alternative medication and unilaterally alteringphysicians' contracts and payment schedules. As with the practicechallenged by the DeGarmos, there are no federal laws directlygoverning such activities, and the courts have yet to rule on them.
The DeGarmos' HMO is the largest in the region. It has 100,000customers in West Virginia and eastern Ohio. DeGarmo is a businessmanager in a doctor's office; Michael, her husband, runs his ownbusiness remodeling homes and building additions.
Stephen was riding his bike to flag football practice oneSeptember afternoon in 1990 when a pickup truck smashed into him.For three months, his life hung in the balance. When the crisis hadpassed, Susan DeGarmo applied her considerable energy to getting therehabilitation he would need.
To the DeGarmos, their $950,000 settlement with the driver -reduced by legal fees and court costs to just over $500,000 - seemedlike the bare minimum Stephen would need.
To the Health Plan of the Upper Ohio Valley, however, it seemedlike a windfall. And the HMO wanted $128,000 of it.
The HMO's position was that it had paid for Stephen's health carewhile the family had paid nothing more than the monthly premiums andsmall co-payments required for each doctor's office visit orhospital stay.
'We said we had the right to the money,' said Dave Mathieu, thehealth plan's vice president for marketing. 'She (Susan DeGarmo)said, 'Tough.' So the only way to get it was to sue her.'
The DeGarmos found it bad enough that their own health careprovider would sue when their son faced the rest of his days in awheelchair. What turned their distress into a major court case wasthat the HMO demanded payment of the full amount that Stephen'sdoctors and hospital had billed, not just the discounted amount thatthe health plan actually had paid them.
Like most HMOs, the Health Plan of the Upper Ohio Valley paysconsiderably less to the doctors and hospitals in its network thanthose doctors and hospitals bill non-HMO patients.
The amount paid by the health plan for Stephen was said by theDeGarmos to have been discounted 40 percent to 50 percent. Thatmeant the HMO was seeking nearly twice as much from the DeGarmos asit had paid.
As Kresen prepared the DeGarmos' case, he discovered that Susanwas just one of hundreds of people who had received letters from theHMO requesting repayment of part of their court awards and out-of-court settlements.
So he sought to turn the DeGarmo case into a class action onbehalf of all the others. Ultimately, Kresen divided the case intofour class actions, each on behalf of plaintiffs with somewhatdifferent insurance contracts.
The first of the four suits to go to trial did not directlyinvolve the DeGarmos, but Susan DeGarmo and other HMO memberstestified about their experiences at the hands of the health plan.
At the conclusion of the trial, state Circuit Judge John T.Madden ruled that the Health Plan of the Upper Ohio Valley owed$68,000 - the difference between billed and paid amounts - to theroughly 80 HMO members who had brought the suit.
'There is something offensive to a proposition that permits anentity to profit by its members' misfortune,' Madden wrote. Hecalled the HMO's practice of recovering from injured patients morethan had actually been paid for their care 'neither fair norequitable nor right.'
He turned over to a jury the decision of whether to awardcompensatory damages for pain and suffering, or punitive damages.The jury came back with a verdict of $4 million as compensation forthe plaintiffs' 'aggravation, annoyance and inconvenience' and $6million in punitive damages.
The verdict forced the health plan to change its ways. 'We justrecover the paid charges now,' Mathieu said.
The HMO also decided to cut its losses and settle the other threeclass actions pending against it. In the end, the Health Plan of theUpper Ohio Valley agreed to pay $9 million to the plaintiffs in thefour suits combined.
DeGarmo got $10,000 for being a class representative and the same$118 as every other member of her class in the lawsuit. But mostimportant to her, she did not have to pay back any of the money fromStephen's settlement.
