Managed Care Lawsuit Watch - January 2004

This summary of key lawsuits affecting managed care is provided by the Health Care Group of Crowell & Moring LLP. If you have questions or need assistance on managed care law matters, please contact any member of the health law group.

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Cases in this issue:

• Academy of Medicine v. Aetna
• In re CIGNA Healthcare of Maine, Inc., and CIGNA Behavioral Health, Inc.
• In re Managed Care Litigation
• In the Matter of LymeCare, Inc., and Neuner v. Horizon Blue Cross Blue Shield
• Singh v. Prudential Health Care Plan, Inc.

Academy of Medicine v. Aetna Ohio Ct. Com. Pl. No. A0204947 (order and final judgment of dismissal 12/29/03)

On December 29, 2003, judges from Ohio and Kentucky presided jointly over a hearing on a settlement between Humana Inc. and Cincinnati area physicians. Both courts approved the settlement. The Academy of Medicine of Cincinnati and several other physician groups sued in Ohio and Kentucky courts, alleging that four payors had colluded to maintain low physician reimbursement rates. The agreement removes Humana from the class action lawsuit, but requires Humana to prospectively increase reimbursement rates to Cincinnati area physicians by $100 million over three years. The settlement does not affect the other three payors Aetna Health Inc., United Healthcare of Ohio Inc., and Anthem Blue Cross and Blue Shield, whose cases are pending.

In re CIGNA Healthcare of Maine, Inc., and CIGNA Behavioral Health, Inc. State of Maine, Dept. of Professional and Financial Regulation, Bureau of Insurance Docket No. INS 03-451 (Consent Agreement, 12/12/03)

CIGNA Healthcare of Maine, Inc., and its subsidiary, CIGNA Behavioral Health, Inc., will pay over $2 million in fines and restitution under a Consent Agreement with the Maine Bureau of Insurance and Department of the Attorney General. CIGNA allegedly violated Maine insurance laws involving claims processing, grievance procedures, enrollee complaints, record retention, and marketing. For example, CIGNA allegedly failed to (1) pay claims on time, (2) pay interest, (3) keep supporting documentation of claims, (4) have adequate procedures for identifying and correcting errors in a timely fashion, (5) reasonably investigate claims, (6) issue timely written decisions regarding grievances and appeals, (7) record specific information about grievances and appeals, and (8) provide proper notice of cancellation to individual enrollees, as required by state law. Moreover, CIGNA Behavioral Health allegedly failed to maintain written record retention policies.

CIGNA agreed to pay a $900,000 penalty to the Bureau of Insurance and over $914,000 as interest on claims that it paid late for calendar years 2001 and 2002. CIGNA must also file a corrective action plan.

In re Managed Care Litigation S.D. Florida MDL No. 1334 (12/08/2003)

Judge Moreno denied most parts of a motion brought by managed care companies seeking the dismissal of RICO and other claims against them by more than 700,000 doctors.

The Court ruled that six medical associations had standing to sue because they had adequately pled an injury in fact. The Court also said that the doctors' RICO claims were sufficient to move forward.

Judge Moreno ruled against the doctors, however, on certain of the issues raised by the companies' motion to dismiss. The Court dismissed state law deceptive practices and prompt-payment claims, and found that nonparticipating provider claims, where their original claim for payment was based on ERISA, could be rejected for further RICO proceedings.

In the Matter of LymeCare, Inc., and Neuner v. Horizon Blue Cross Blue Shield Bankr. D. N.J. No. 98-18746/JHW (11/5/03)

The Bankruptcy Court for the District of New Jersey ruled that a provider specializing in the treatment of Lyme's Disease that was assigned benefits by Horizon Blue Cross and Blue Shield ("Horizon") subscribers had standing under ERISA to bring a claim for reimbursement against the health plan for services that it provided to subscribers while it was a participating provider. Horizon contended that the provider, LymeCare, did not have standing to sue under ERISA because it was neither a plan participant nor a beneficiary. The Court disagreed, citing to other Circuits' determinations that ERISA favors standing for medical provider assignees. The Court dismissed, however, LymeCare's claims for reimbursement for patients insured by FEHBP and New Jersey's State Health Benefits Plan ("SHBP"), finding that (1) ERISA was not applicable to these plans, (2) state-law breach of contract claims were preempted by the federal and New Jersey health benefits plan statutes, and (3) LymeCare failed to exhaust its administrative remedies prior to bringing an action for reimbursement.

Singh v. Prudential Health Care Plan, Inc. U.S. No. 03-478 (cert. denied 12/8/03) 4th Cir. No. 01-1102 (7/3/03)

The Supreme Court left standing the Fourth Circuit's July 2003 ruling that a state law action seeking restitution for money that a plaintiff paid to comply with defendant HMO's subrogation clause was completely preempted by ERISA because it involved a claim that sought return of benefits under the plaintiff's plan. Singh sued Prudential in state court seeking reimbursement of money she paid to Prudential under its subrogation clause after she recovered a $5,000 personal injury settlement arising from an automobile accident. Singh sued claiming that Prudential's subrogation clause was illegal under a provision of the Maryland HMO Act, which was later repealed. The provision precluded HMOs from asserting subrogation claims against their enrollees.

 

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