The Health Care Blog reminds that oral argument occurred yesterday in the U.S. Supreme Court in an appeal of this Fifth Circuit decision, which involves tort claims against HMO’s under the Texas health care liability statute and the HMOs’ contention that claims under the state statute are preempted by the federal ERISA statute. The Fifth Circuit previously rejected the HMOs’ attempt to use ERISA preemption to remove the tort cases to federal court and upheld the plaintiffs’ right to litigate their claims in Texas state courts, which are rarely as corporate-defendant friendly as federal courts. The Supreme Court’s decision in this case will address a festering issue in ERISA law — that is, whether an HMO’s medical-necessity determinations are really benefits determinations that are completely preempted by ERISA.
As you might expect, the battered health care finance industry is closely eyeing the outcome of this case. The applicable ERISA provision provides a narrow basis for recovery against plans that withhold a requested level of care and a conservative measure of damages for successful plaintiffs. On the other hand, as is Texas’ tradition, Texas tort law provides injured plaintiffs with a more liberal basis for recovery and thus, exposes health plans to far greater economic risk.
So long as HMOs and other managed care units are forced to make mixed coverage and treatment decisions against a backdrop of potential tort liability, opponents of managed care believe that the managed care units would be far less willing to risk limiting or denying care that physicians and patients request. On the other hand, HMO’s and managed-care plans view an adverse result in the case as a threat to the financial security of employee benefit plans that extend health coverage to millions of workers and retirees.
Tom Mayo, the health care lawyer who is the author of the Health Care Blog, seems to think that the Supreme Court is leaning in favor of the managed care plans and federal preemption. However, the Supremes are notoriously difficult to read in cases such as this, so follow this one closely.

This NY Times article reports on the sad case of a former midlevel executive of Houston-based Dynegy, the energy company that attempted to merge with Enron and then called off the deal shortly before Enron filed bankruptcy in December, 2001. Dynegy subsequently went into its own tailspin that cost its former CEO his job, but has to date avoided bankruptcy.
On Thursday, Jamie Olis faces a federal probation department recommendation that he serve 24 to 30 years in prison for organizing a scheme to falsify Dynegy’s books. Mr. Olis and two former associates at Dynegy were found guilty last year of devising a secret project to disguise a $300 million loan as cash flow. Mr. Olis, a 38-year-old with an infant daughter, declined to strike a plea bargain, choosing instead to take his chances at trial, where he elected not to testify. As noted in earlier posts here regarding the Martha Stewart trial, the strategy of a white collar defendant choosing not to testify during trial is a risky move. In this case, Mr. Olis’ lawyers were unsuccessful in their defense of portraying Mr. Olis as a corporate soldier doing as he was told and blaming his Dynegy superiors for the scheme.
If U.S. District Judge Sim Lake agrees with the probation department’s sentencing recommendation on Mr. Olis, it would be the most severe prison term for a business crime in recent memory. The two other Dynegy officials convicted of taking part in the scheme struck plea deals before trial giving them maximum sentences of five years. Mr. Olis’s lawyers are seeking a sentence of 5 to 10 years, arguing both that he is not responsible for all of Dynegy’s losses and also that he has no previous criminal record.
Mr. Olis never rose above a position of vice president for finance at Dynegy after serving as the senior director of tax planning. Unlike defendants in other higher-profile corporate fraud cases, he never amassed a fortune from his time at Dynegy. The most money he made at Dynegy in any year was a salary of $162,000 and a bonus of $110,000, in addition to selling Dynegy stock worth about $200,000.
You can bet that more than a few criminal defense attorneys for former Enron executives will be watching the result of Mr. Olis’ sentencing closely.