ERISA and Health Plans: The Latest Cigna Case Illustrates the Changing Landscape of ERISA Litigation

February 3, 2020

In a 150-page complaint filed on December 31, 2019, styled Advanced Gynecology and Laparoscopy of North al. v. Cigna Health and Life Insurance, Cigna is accused of violations of  the Employee Retirement Income Security Act of 1974 (ERISA), of acting in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), and of committing a variety of state law violations. The Complaint accuses Cigna of engaging in several “brazen embezzlement and conversion schemes, through which it maximizes profits by defrauding patients, healthcare providers, and health plans of insurance out of tens of millions of dollars every year.”[1] Complaint ¶ 1. The plaintiffs, a number of different out-of-network health care providers, allege that Cigna cheats out-of-network healthcare providers by massively underpaying them for medically necessary services already rendered to beneficiaries of health plans administered by Cigna. Id. Cigna then allegedly retains those amounts withheld, which rightfully belong to the health plans, for its own use. Id. The complaint alleges that as a result, Cigna shifts the “financial responsibility for covered expenses onto the backs of patients, their employers, and [p]laintiffs, while Cigna gets rich.” Id.

The plaintiffs claim they protested Cigna’s unlawful processes and procedures in numerous communications to Cigna management. However, Cigna management allegedly informed them that Cigna has no compliance department capable of addressing these issues and encouraged the providers to file a lawsuit to “prompt Cigna to act.” Complaint ¶ 2. This lawsuit was filed on the heels of two similar class-action lawsuits against Cigna and its third-party administrator (TPA), American Specialty Health (ASH). Cigna settled these lawsuits for $20M total (one for $11.75M and one for $8.25M) in September of 2019. Both lawsuits were filed by out-of-network chiropractors, and alleged that Cigna and ASH colluded to overcharge members of Cigna’s employer-sponsored health plans. Specifically, the cases alleged that ASH charged employer-sponsored health plans hidden fees, by [including false charges for therapy services that were never provided /calling certain charges medical expenses for therapy services.] The plaintiffs accused Cigna and ASH of breaching their ERISA duties by concealing information about the true nature of the charges and alleged that Cigna falsified the Explanation of Benefits (EOB) forms to hide ASH’s administrative fees. The settlement was approved by the Pennsylvania district court judge, and neither Cigna nor ASH admitted any wrongdoing, although the judge’s approval order acknowledge that both organizations agreed to take certain actions to reform some aspects of their business.

The main accusation in the recently-filed Advanced Gynecology complaint is that Cigna set up a complex web of processes and procedures which has resulted in providers to be reimbursed  for only a fraction of their incurred charges, rather than the amount they should be reimbursed under the  plans administered by Cigna. Complaint ¶ 8. The providers allege that these violations are compounded, because Cigna withdraws the entire dollar amount of the healthcare provider’s claim from the trust funds of self-funded plans, but only pays a small portion of those funds to the provider and pockets the rest. Id. According to the plaintiffs, Cigna’s improper denials, downward adjustment of payments and underpayments of claims submitted by them for “medically necessary elective and emergency services” violates ERISA and RICO. The complaint alleges that “Cigna has engaged in a pattern of racketeering activity that includes embezzlement and conversion of funds, repeatedly and continuously using the mails and wires in furtherance of multiple schemes to defraud.” Id. at ¶ 10.

This case is  one of a recent wave of cases alleging similar violations and other types of illegal behaviors that insurers who administer self-funded plans purportedly engage in to the detriment of the health plans, the participants, and their out-of-network providers. Those with fiduciary responsibility for ERISA-covered health plans should be prepared for increased scrutiny of self-insured health benefits that has long been the norm for retirement benefits.

[1] Access the complete docket for Advanced Gynecology and Laparoscopy of North al. v. Cigna Health and Life Insurance; Case Number: 2:19-cv-22234, United States District Court for the District of New Jersey, Filed December 31, 2019.