Physicians can’t proceed with Cigna class action, but patients can

Patients who filed a proposed-class action lawsuit (PDF) alleging that one of the nation’s largest insurers intentionally underpaid medical claims will be able to move forward with their lawsuit, but a federal judge ruled that the AMA and other physician organizations that were also part of the complaint do not have the standing to sue.

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In an effort to shed light on misconduct by one of the nation’s largest health insurance plans, the Litigation Center of the American Medical Association and State Medical Societies, the Medical Society of New Jersey and the Washington State Medical Association in 2022 joined patients as plaintiffs in a lawsuit alleging that Cigna failed to pay the medical claims based on physicians’ contracts with MultiPlan Corp.

Instead, they said, Cigna applied its own, lower-payment methodology for nonparticipating physicians and other health professionals. That move left patients exposed to balance billing for physician and other health service fees.

The class-action suit came long before a recently published investigation in The New York Times based on interviews with “more than 100 patients, doctors, billing specialists, health plan advisers and former MultiPlan employees,” along with a review of more than 50,000 pages of documents.

The five key takeaways from the paper’s investigation were that:

The less that can be paid to physicians, the bigger the fees can be for insurers and MultiPlan.
Patients could be on the hook for unpaid bills.
Some physicians and other health professionals face big pay cuts.
Employers get charged large and unanticipated fees.
Private equity is backing both insurers and MultiPlan.

Unfortunately, U.S. District Judge Omar A. Williams said in his ruling that the AMA Litigation Center and the two state medical societies cannot move ahead as part of the lawsuit, AMA/Stewart v. Cigna, because of “the absence of a concrete and particularized injury traceable to” Cigna’s conduct.

Williams ruled that facts alleged in the lawsuit don’t show that the medical associations’ physician “members have suffered or will suffer an injury in fact, nor do they show that defendants will be liable for that injury.”

The judge also rejected the AMA Litigation Center and others’ claims that their physician members are injured by the uncertainty they will face when treating patients, saying “this uncertainty does not appear any greater than that inherent in the modern health care system, in which providers and patients alike often are unclear as to what the out-of-pocket cost of a particular procedure might be until after a claim is submitted, which claim may be denied by insurers for myriad reasons.”

Find out more about the cases in which the AMA Litigation Center is providing assistance and learn about the Litigation Center’s case-selection criteria.

Physicians allege misconduct

The AMA Litigation Center and the state medical associations alleged “that Cigna’s misconduct is riddled with conflicts of interest and manipulations that routinely shortchanged payments to MultiPlan Network physicians and interfered with the patient-physician relationship.”

Doctors and other health professionals sign contracts with MultiPlan agreeing to accept a set percentage of their billed charges as full payment. In other words, they agree not to hold the patient liable for the difference between the original amount charged for the service and the discounted rate, a practice commonly known as balance billing.

In turn, MultiPlan enters into contracts with its clients, health-benefit plan issuers and claims administrators like Cigna to provide them access to a MultiPlan network. Providers who join a MultiPlan network indirectly contract with MultiPlan’s clients, such as Cigna.

Cigna advertises its relationship with MultiPlan to its insureds and their physicians, among other things, placing a MultiPlan logo on insurance cards that Cigna plan members receive. The lawsuit notes that Cigna sometimes applies the MultiPlan contracted rates when it processes claims, but not always.

When the company didn’t apply the contracted rates, the AMA Litigation Center and others alleged that Cigna breached fiduciary duties, violating the Employee Retirement and Income Security Act of 1974, as well as state laws.