The U.S. District Court for the Central District of California dismissed claims in a multidistrict litigation (MDL) accusing insurers of knowingly creating and using flawed data as a basis to set “usual, customary and reasonable” (UCR) reimbursement rates.
The primary question in the action was whether Anthem, which changed its corporate name from WellPoint, Inc. to Anthem in December 2014, paid the UCR rate when reimbursing out-of-network services (ONS). The case was initially brought by insurance subscribers, health care providers, and medical associations who claimed that they were allegedly promised a UCR reimbursement, but were underpaid due to flawed UCR data provided by an ONS reimbursement database called Ingenix and by the insurer’s use of non-Ingenix ONS reimbursement methodologies. At bottom, the subscribers and health care providers argued that the reduced reimbursement rates resulted in higher out-of-pocket expenses for subscribers and asserted claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), the Sherman Antitrust Act, the Employee Retirement Income Security Act of 1974 (ERISA), federal regulations, and state law.
In July 2013, the Court issued an order granting in part and denying in part Anthem’s motion to dismiss most, but not all claims. The Court held that the state and federal anti-trust claims, as well as the RICO claims, should be dismissed in their entirety with prejudice. It also found that the ERISA claims, to the extent that they involved non-Ingenix methodologies, along with those that involved alleged non-disclosures should be dismissed with prejudice. The Court also dismissed most of the plaintiffs’ state law claims with prejudice.
Ultimately, after 2013, only some claims by certain subscribers remained including an ERISA benefits claim and certain state law claims. For example, insurance subscribers, Darryl and Valerie Samsell asserted a claim for breach of the implied covenant of good faith and fair dealing under Virginia law. Specifically, they alleged that Anthem failed to properly reimburse ONS for oral surgery their daughter received in July 2004 and May 2005 under their Anthem Virginia health care policy. On July 19, 2016, the Court dismissed these claims because the Samsells failed to file their case within the three-year limitations period established in their insurance contract.
Another subscriber, Mary Cooper, asserted an ERISA claim for unpaid benefits arguing that the insurer improperly reduced her ONS benefits via two mechanisms: “(1) undisclosed exceptions which had the effect of reducing Mrs. Cooper’s ONS payments at the claim level, and (2) employment of low [ONS] rates based upon Ingenix data.” In particular, Cooper claimed that Anthem did not pay its full 70% reimbursement share under a New Jersey policy when her late husband received ONS for cancer between 2006 and 2007. Cooper argued that, as a result of Anthem’s failure to properly reimburse, health care providers billed her higher balances than she would otherwise have been billed. Anthem argued that Cooper lacked standing because she did not produce evidence that she was billed for the balance the insurer did not cover. The Court agreed.