A Kailua-Kona judge on Friday ruled that contract terms and conditions the state’s largest health insurer imposes on doctors and patients are “unconscionable” and “unenforceable.”
Third Circuit Chief Judge Robert S. Kim made the ruling in his written order denying Hawaii Medical Services Association’s motion to compel arbitration for claims made by Hilo obstetrician-gynecologist Dr. Frederick Nitta’s and the late Adrian “Scott” Norton.
The order also denies HMSA’s request for dismissal of a case by Nitta’s patient Charlene Orcino and a request to suspend a civil suit filed by Nitta, Orcino and Norton’s family, pending arbitration.
Hilo attorney Ted Hong, who represents the plaintiffs in the suit, called Kim’s ruling “groundbreaking.”
“This has never happened before despite decades of challenges of doctors challenging the HMSA monopoly,” Hong said Monday. “And to have a judge declare that all these HMSA contracts are unconscionable … means that all these HMSA contracts are restricting doctors’ ability to practice (and) are restricting patients’ ability to be tested or get the proper medication.
“It’s one step away from invalidating them all.”
The contracts Hong refers to are called “HMSA agreements” and are standard contracts drawn up and used by the insurer. The three contracts Kim ruled unconscionable and unenforceable are: HMSA’s Participating Physician Agreement, dated Apr. 3, 2021, in the case of Nitta; HMSA’s Provider Agreement for Medicare Plans, dated Oct. 26, 2009, in the case of Norton; and Quest Participating Physician Agreement, dated March 19, 1999, in the case of Orcino.
Kim ruled HMSA’s agreements are “contracts of adhesion,” a legal term meaning a contract one party — which has more power — drafts. The other party, which doesn’t have the power or resources to negotiate a better deal is essentially forced to take or leave the goods or services offered under the contract terms.
Contracts of adhesion aren’t inherently illegal — rental agreements, leases, deeds, loans and mortgages are almost always contracts of adhesion. They become illegal when the terms are ruled by a court to be unreasonable or unconscionable.
Kim’s ruling orders the parties to contact the court to discuss a postponement in the trial date, currently scheduled for May 7.
Nitta, a board-certified OB/GYN in Hawaii since 1993, has a history of battling the medical establishment, including HMSA — which was ranked by Hawaii Business Magazine as the state’s eighth most-profitable business in 2023, with more than $4 billion in sales.
Nitta is seeking unspecified damages from HMSA and its directors, describing HMSA’s withholding of benefits as “racketeering activity.”
Among the complaint’s allegations were that in the cases of 30 patients identified only by their initials in the lawsuit, HMSA rejected Nitta’s diagnoses and/or treatments, forcing “each, individual patient/client to go without treatment, or changed the proposed treatment, medical services, procedures, tests, hospitalization and/or medication, to something that did not address their health condition or worsened their health condition.”
In Orcino’s case, Nitta prescribed Nifedipine — a drug usually prescribed for high blood pressure or chest pain, but also used to treat preterm labor — to a pregnant Orcino on Jan. 25, 2021. Orcino attempted to fill her prescription at two East Hawaii pharmacies but was told HMSA wouldn’t honor Nitta’s prescription for Nifedipine, the suit states.
The lawsuit claims between the time her prescriptions were denied and she raised the money to pay for the prescription out-of-pocket, about $200, her conditioned worsened. She was medivaced to Oahu and gave birth at 25 weeks pregnant to a “dangerously premature” son who weighed less than 3 pounds and who “requires significant and regular medical attention based on his developmental challenges.”
The suit calls HMSA’s refusal to cover the prescription and the ensuing delay “a substantial and contributing factor to the nearly fatal, premature birth” of the infant, Jayson Orcino, and his need for ongoing medical care.
Norton’s case was merged into Nitta’s and Orcino’s. According to Kim’s finding of facts, Norton’s physician — family practitioner Dr. Richard Lee-Ching — recommended early last year that Norton receive magnetic resonance imaging, but HMSA refused to cover the scan or a referral to a specialist, covering only physical therapy.
Norton’s condition worsened, and an MRI later authorized by HMSA found he had prostate cancer that had spread to his back, spine, hip and ribs. Norton was wheelchair-bound before his death, according to the order.
“His doctor originally thought (Norton) had cancer, wanted to go and test him, get an MRI … and HMSA refused and sent him to physical therapy,” Hong said. “He got worse. They finally let him get tested for cancer, and by that point, it was too late.”
HMSA’s Honolulu-based attorney, Randall Whattoff, said his client is considering its options and he couldn’t comment further. Those options include proceeding to trial, requesting Kim reconsider arbitration or appealing Kim’s ruling.
Email John Burnett at jburnett@hawaiitribune-herald.com.