New Jersey District Court Derails Plaintiffs’ Antitrust Claims in Ingenix Case

In 2008, the New York Attorney General launched an investigation into the manner in which Ingenix, a data collection subsidiary of UnitedHealth that calculated “usual and customary” (“UCR”) provider charges for many insurers, operated.  Amid claims that Ingenix had improperly calculated the UCRs to reduce insurer reimbursements to providers, UnitedHealth ultimately settled the matter with the Attorney General by agreeing to pay a significant civil fine and agreeing to spin off Ingenix into a separate entity that was no longer controlled by the insurer.

As is often the case, the New York Attorney General’s investigation spawned a private class action proceeding, Franco v. Connecticut General Life Insurance Co. (D. N.J.).  The plaintiffs -- both out of network providers and insureds -- alleged that, the defendants (Connecticut General, United Health Group and Ingenix) had agreed to use improperly calculated UCRs in determining what the insurers would pay for out of network services, and that this agreement resulted in the underpayment of fees to the out of network provider plaintiffs and an overpayment of co-pays by the insureds.  Plaintiffs alleged that this conduct violated the antitrust laws, ERISA and various civil RICO provisions.  On September 23, however, District Judge Stanley Chesler delivered a significant victory to the defendants, dismissing all of plaintiffs’ antitrust claims and reducing the scope of plaintiffs’ RICO and ERISA claims as well.

With respect to the plaintiffs’ antitrust claims, Judge Chesler first concluded that the provider plaintiffs lacked standing to assert their claims.  Judge Chesler noted that the insureds had not expressly assigned their antitrust claims to the providers, and that the provider plaintiffs “cite no authority to the Court that supports the pursuit of antitrust claims based [solely] on a party’s status as a third party beneficiary.”  In addition, the providers’ contention that they had standing because the alleged depression in UCRs targeted them as much as it did the insureds was, according to the Court, a “superficial and underdeveloped” argument “unsupported by reference to the factual allegations in the complaint.”  Accordingly, the providers’ antitrust claims were dismissed for lack of standing. 

The Court then turned to the insureds’ antitrust claims, and, while these claims focused on different issues, the insured plaintiffs were no more successful in preserving their claims than the providers.  The insured plaintiffs first argued that the insurers’ conduct constituted per se price fixing.  The Court, however, disagreed.  As explained by the Court:  “Assuming the defendants engaged in concerted action to cap out of network reimbursements, their agreement would pertain to one component of the product sold, not to the price at which the policy is made available for purchase,” and thus, because out-of-network reimbursements are only “one aspect of the product sold,” and not a distinct product itself, the insured plaintiffs’ had failed to state a plausible per se claim of price fixing. 

The Court then turned to whether the insureds’ antitrust claim might still survive as a rule of reason claim.  Focusing on the fact that the market that had allegedly been restrained by the defendants’ conduct was the data market for UCR rates, the Court noted that the plaintiffs “do not participate in the data market; they are neither competitors engaged in the business of supplying prevailing fee schedules nor direct purchasers of the products sold by Ingenix.”  As the Court further noted, this circumstance is fatal to a plaintiff’s antitrust claim unless, under the Supreme Court’s decision in Blue Shield of Virginia v. McCready, a plaintiff can credibly maintain that it is the direct victim of the anticompetitive conduct.  The Court, however, found that plaintiffs’ allegations did not fit within the contours of McCready.

Specifically, the Court stated, “Insofar as the Complaint could be read to allege that defendants manipulated insurance benefits to the detriment of [insureds] as part of a scheme which had the purpose or effect of inhibiting competition among healthcare providers, plaintiffs’ antitrust claims would appear on the surface to be similar to McCready.”  Here, however, the Court concluded that “Plaintiffs’ antitrust theory posits that [the insurers] inhibited competition among healthcare providers by incentivizing [insureds] to utilize providers in their preferred provider network rather than providers who are not,” and “there is nothing anticompetitive about the complained-of scheme of shifting business to in-network providers.”  Accordingly, the Court held that while “the alleged misconduct may state a claim for relief under other legal theories, it does not confer antitrust standing upon plaintiffs.”  In summary, because “the injury of which plaintiffs complain – receiving lower out of network benefits than they would have received had accurate prevailing fee schedules been employed by [the insurers] – is not one which flows from defendants’ alleged efforts to reduce competition, the insured plaintiffs failed to plead any plausible antitrust injury,” and their antitrust claims had to be dismissed.

With Judge Chesler’s dismissal of all of plaintiffs’ antitrust claims, the case now proceeds into discovery on the ERISA and other claims that Judge Chesler concluded the plaintiffs had adequately pled.