The state's highest court has upheld the insurance commissioner's power to order health insurers to pay for treatment deemed medically necessary.

The unanimous decision by the Court of Appeals upholds a 1998 Maryland law that allows patients to appeal to the commissioner when they think they are being denied needed care. The commissioner can refer the case to independent medical specialists and order the insurer to pay for treatment found to be needed.

Connecticut General Life Insurance Co. had challenged the law, arguing that federal law prevents state officials from exercising such authority.

"The Maryland health insurance laws at issue are integral to the policy relationship between the insured and the insurer," Judge John C. Eldridge wrote in a ruling issued Friday. "The state laws provide the insured with legally enforceable rights."

David M. Funk, the lawyer for Connecticut General, said yesterday that his client will probably decide in the next 30 days whether to appeal, and that the case could wind up in the Supreme Court.

Larsen said he hopes there will be no appeal.

"I hope this ends Connecticut General's efforts to defeat what most people view as a reasonable and common-sense patient protection law," he said yesterday.

The case stems from two health claims disputes from 2000. In one, Connecticut General argued that a 32-year-old woman could receive rehabilitation in a nursing home after brain surgery.

Larsen ordered the insurer to pay for more-expensive treatment in a hospital. He also fined Connecticut General $125,000 - the largest penalty he has imposed in such a case - for procedural violations such as not informing the patient about appeal rights.

In the other case, Connecticut General denied payment for a one-day hospital stay for a patient who had undergone a hysterectomy and other procedures, saying the patient had been healthy enough to be discharged a day earlier than she was.

Eldridge noted that the doctor who denied the stay was a pediatrician, although the case involved gynecological surgery. An independent gynecologist reviewed the case for Larsen and said the full hospital stay was medically justified. The insurance commissioner ordered payment of the claim and a $2,500 fine.

Connecticut General went to court to challenge Larsen's authority. A year ago, Judge John C. Themlis, in Baltimore Circuit Court, told the parties, "I'm going to make both of you unhappy." He ruled that under federal law, Larsen could impose fines but could not order payment of claims.

The insurer and the regulator appealed.

At issue is the federal Employee Retirement Income Security Act of 1974, known as ERISA. That law offers, Larsen wrote in one of his decisions, "a particularly complex statutory structure for determining whether the federal regulatory scheme would prevail over state law."

There have been a number of Supreme Court cases on ERISA, including a June ruling that upheld an Illinois law allowing patient appeals of medical necessity disputes.

However, Funk said that the Illinois law, under which the patient can go to court, is different from Maryland's, which requires an administrative review. That means, he said, that if the Maryland case is appealed, it will raise different legal issues.