Cigna vs. Humble: Key Takeaways for Out-of Network Providers

The number of lawsuits involving billing disputes with Employee Retirement Income Security Act (“ERISA”) and out-of-network healthcare providers has increased recently. Third-party claims administrators are suing out-of-network healthcare providers for alleged fraudulent billing practices. In a 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), Cigna sued Humble Surgical Hospital, LLC, a physician-owned hospital (“Humble”), to recover alleged overpayments made to Humble due to fraudulent billing practices in violation of both ERISA and state common law. Judge Kenneth Hoyt of the U.S. District Court for the Southern District of Texas denied Cigna’s request for reimbursement for alleged overpayments after a nine-day bench trial. He awarded Humble more than $13 million to cover certain alleged underpaid claims and ERISA penalties.

In the lawsuit Cigna made various allegations such as the failure to collect co-payments, deductibles, and co-insurance by the hospital. Broadly speaking, Cigna alleged that Humble engaged in a fee-forgiving practice by consistently waiving the “patient cost-share” of Humble’s billed charges. Cigna consistently audited South Florida providers alleging failure to collect patient financial responsibility or fee-forgiveness, then informing the provider that it was not entitled to any reimbursement because these practices fell within the exclusionary language of the member’s plan.

Cigna argued that this practice allowed the plan participants to pay nominal amounts, while causing them to pay more than its participant’s required share. While defending its non-payment of claims, Cigna, relied in part on its interpretation of the standard exclusionary provision included in self-funded ERISA plans it administered that “specifically excluded” from payment “charges which [the participant is] not obligated to pay or for which [the participant is] not billed or for which [the participant] would have been billed except that they were covered under this plan.”

As per Cigna, if a provider waived or made no effort to collect a plan participant’s deductible, co-pay or co-insurance amount, the exclusionary provision allowed Cigna to either not pay at all, or pay only a portion of the claim(s) in accordance with Cigna’s proportionate share analysis. In its interpretation of the provision, Cigna claimed that if a portion of the bill was “forgiven,” such amount was specifically excluded from the plan and Cigna had no obligation to pay it.

The court rejected Cigna’s clarification and found that Cigna had abused its discretion in the process, and reasoned that it was contrary to how the average plan participant would interpret the exclusionary provision. In addition, the average plan participant is likely to read the provision as requiring Cigna to pay its full share for covered services in accordance with the terms of the plan, regardless of the amount ultimately charged to the participant. Also, the court found no support in Cigna’s interpretation for its proportionate share analysis.

Although, the case may be appealed in future, but there are few lessons from the court decision. Primarily, the exclusionary provision common in most plans is not always enough to justify non-payment of claims by the administrator, even under a discretionary standard of review. In its place, the plan document and summary plan description should specifically state that if a provider does not bill or collect for the deductible, co-pay and/or co-insurance amount, the out-of-network charge will no longer be considered a covered charge under the plan. Plus, plans should also consider providing that the out-of-pocket annual maximums do not apply to out-of-network claims. Also, plans should clearly express the intent to create an equitable lien and/or constructive trust by specifically adding such subrogation-type language to the relevant provision, giving the plan the right to collect overpayments.

Out-of-network providers need to understand and utilize this important decision to compel health insurers to pay out-of-network claims. Our expert speaker Thomas J. Force, Esq.—a licensed attorney—will shed light on this complicated legal precedent and how it impacts OONs. Attend this Live Audio Conference “CIGNA vs. Humble– Impact on Balance Billing and OON Providers” on Wed, Aug 3, 2016 to get an easy break down of this complicated legal precedent and how it impacts OONs.