Group Health Cooperative defended itself, saying it is not subject to bad-faith claims. Members can sue us, said the HMO, only for medical malpractice. Differences between bad faith and malpractice can be economically significant. Many states, including Wisconsin and New Mexico, cap malpractice recoveries against doctors and hospitals. There is only so much you can win.
Nothing limits bad-faith recoveries.
HMOs are supposed to decide by making medical decisions about patients' care. They are not allowed to decide simply to save themselves money. In the Wisconsin case, the young girl and her attorneys alleged that the cutoff of hospitalization after six weeks was for the sake of savings and had no medical basis. The Wisconsin Supreme Court ruled that HMO agreements have important characteristics in common with insurance contracts. Courts traditionally impose tough standards on insurance policies because customers can't, as a rule, negotiate.