Health Care Management Papers

Document Type

Journal Article

Date of this Version

6-1997

Publication Source

The Journal of Legal Studies

Volume

26

Issue

S2

Start Page

491

Last Page

519

DOI

10.1086/468006

Abstract

The restructuring of health insurance contracts and health care delivery systems under managed care is the result of competitive attempts to reduce the inefficiencies that developed in medical markets under traditional indemnity insurance. Liability rules that continue to apply norms of customary care threaten to undermine these potential efficiency gains. Liability rules under managed care should treat claims for denial of coverage as contractual disputes, to be brought against health plans as residual claimants. Where contracts are ambiguous, appropriate coverage should be determined using a cost-benefit criterion based on beneficiaries’ willingness-to-pay. Liability claims for negligent care should be permitted only against providers, not against health plans, except where the plan voluntarily assumes liability by contract. Extending liability for negligent care to health plans is likely to distort liability decisions and constrain the competitive evolution of delivery systems. These principles should apply equally to all plans, regardless of their status under the Employer Retirement Income Security Act.

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Date Posted: 27 November 2017

This document has been peer reviewed.