A Plan Administrator Receives “Humble” Pie In Rare Provider Friendly Decision
Recently, the U.S. District Court for the Southern District of Texas issued an interesting decision in the landmark case, Connecticut General Life Insurance Company (CIGNA) v. Humble Surgical Hospital, LLC, CA No. 4:13-cv-03291 (S.D. Tex. June 1, 2016). The result represented a stellar outcome for the out-of-network service provider, which was awarded more than $13 million.
Cigna sued Humble, an out-of-network surgical hospital, to recover alleged overpayments made to Humble because of fraudulent billing practices in violation of the Employee Retirement Income Security Act of 1974 (“ERISA”) and state common law. Cigna is a managed healthcare company and, as a fiduciary, manages both ERISA welfare benefit plans and private healthcare insurance. Humble asserted counter-claims for nonpayment and underpayment of claims in violation of ERISA, among other claims.
This case arose shortly after Humble opened for business. Humble initially submitted claims to Cigna for reimbursement. Many, if not all of the claims, were processed by Cigna through Multiplan or Viant (third-party repricing entities) at “allowable” amounts per negotiated pricing agreements. Cigna then paid the claims at these amounts. Then, Cigna recognized what it referred to as “exceedingly large-dollar” claim amounts and directed all of Humble’s claims to its Special Investigations Unit (“SIU”) for investigation, processing and payment. At this point, many of Humble’s claims went unpaid because Cigna claimed that Humble never provided requested information or that the member/patient did not fully pay their co-pay or co-insurance. Cigna only paid claims where the co-pay/co-insurance was paid up front, while other claims were paid on Cigna’s “proportionate share” analysis.
Following a 9-day bench trial, the Court awarded Humble more than $13 million in damages to cover underpaid claims and ERISA penalties.
In sum, Humble waived or reduced the patient contribution for particular medical services while still billing Cigna for Cigna’s portion. Cigna then refused to pay all or a portion of its obligation to Humble, based on Cigna’s interpretation of the exclusionary language in its plans. The exclusionary language from the plans relied upon by Cigna to condition coverage upon a member’s/patient’s payment states, in the pertinent part, as follows:
Additional coverage limitations determined by plan or provider type are shown in the Schedule. Payment for the following is specifically excluded from this plan: . . . charges which you are not obligated to pay or for which you are not billed or for which you would not have been billed except that they were covered under this plan.Cigna interpreted the plan language to mean that Cigna was not obligated to make full payment to a service provider if the service provider waived or reduced the patient contribution.
The Court held that Cigna’s interpretation of the exclusionary plan language was legally incorrect, i.e., that an average plan participant would not interpret the plan language to mean that Cigna was relieved of its obligation to pay based on a waived or reduced patient contribution. Notably, in September 2016, the Court prevented Cigna from arguing the legal correctness of its interpretation of the exclusionary plan language in a similar case, thus again finding that Cigna was not relieved of its obligation to pay claims because the member/patient did not pay or paid a reduced amount. See N. Cypress Med. Ctr. Operating Co. v. Cigna Healthcare, CA No. 4:09-cv-2556 (S.D. Tex. Sept. 28, 2016).
In addition, the Court, held that Cigna abused its discretion by “obstinately denying Humble’s claims for benefits in spite of the medical services provided. . . .” Specifically, the Court noted the fact that Cigna “admittedly has never used the exclusionary language to reject covered services before and was relentless in engaging in an arbitrary manner with regard to Humble and its claims.”
The takeaways from the Humble case for providers are that:
- The standard exclusionary provision in many plans may not be enough to justify non-payment by the claims administrator;
- Providers have no duty to disclose proprietary information contained in underlying contracts to an administrator absent an agreement to do so;
- A service provider should obtain executed assignments and financial responsibility forms from its patients in its favor, which will empower it as an assignee to seek reimbursement of benefits for services provided and to obtain pertinent plan documents and related information directly from the claims administrator;
- The administrator must provide a fair review of claims, both at the processing stage and at the appellate review stage;
- A service provider should contact the administrator and confirm eligibility, coverage and benefits prior to performing a service;
- A service provider need only attempt to collect a co-pay or deductible. In Humble, Humble obtained a financial responsibility form from the member/patient that indicated that the member/patient would be responsible for payment not covered by their managed care plan; and
- In the event a claim is denied, the service provider should send a formal written objection and request for appeal. In addition, the provider should request plan documents and other documents relating to the processing of the claim, as permitted by the executed assignment from the patient.
Humble represents a good outcome for providers that serves as a potential guidepost for challenging arbitrary actions of a benefits administrator under ERISA. It represents a rare example of a Court’s willingness to intervene and police provider-administrator disputes that could be relied upon in a variety of contexts.
If you have questions or require further assistance regarding the information contained in this Legal Alert and the impact on your organization, please contact Brad M. Gallagher at firstname.lastname@example.org, or Linda J. Clark, Chair of the Barclay Damon Health Care Controversies Practice Area at email@example.com.