Long Island medical providers have learned that Cigna is once again striving to “recover” payments made to them. Cigna’s investigation focuses primarily on out-of-network providers, since it believes that its contract language with self-funded ERISA plans entitles it to recover payments made for out-of-network services.
Cigna employs a classic flanking maneuver to box in the targeted providers. It begins by sending letters to its members who have received services at out-of-network providers. The letter asks about services provided, the dates such services were provided, and whether the member paid any co-pay or co-insurance payment to the provider.
Cigna’s target is providers who waive a member’s co-payment or co-insurance deductible. Typically, out-of-network coverage pays providers a percentage of a provider’s usual and customary charges, or a multiple of the Medicare fee schedule for services. Eighty percent reimbursement for a provider’s usual and customary charges has been a common coverage offered in the past. Under such a plan, Cigna (or any other insurer offering out-of-network coverage) would pay the medical provider eighty percent of the amount billed (presuming service is billed at the usual and customary rate). The plan member remains responsible for the other twenty percent of the provider’s charge. This remainder is the co-insurance responsibility.
Many providers argue that since they are not contracted with Cigna (or other plans), they do not have any obligation to charge the member anything else. Cigna claims that in such a scenario a provider has misrepresented her usual and customary rate (since the provider is not attempting to collect a member responsibility), and thus Cigna is not responsible for all or a portion of the claim payment. In seeking recovery of the overpayments, Cigna may offset future payments to the out-of-network provider until the balance is paid.
This scenario played out last year in a Texas case that offered hope to afflicted medical providers. In Connecticut General Life Insurance Company 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. Humble counterclaimed against Cigna for underpayment of claims.
At trial, 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.”
However, the court ruled that Cigna’s practices violated ERISA because it abused its discretion in electing to reject reimbursement for such claims, and that its practices amounted to adverse benefit determinations that did not follow ERISA’s rules. Further, Cigna’s practices interpreted the boilerplate exclusionary language in a different way than most members understood.
Ultimately, the court rejected Cigna’s claims and granted judgment in favor of Humble on its counterclaims for $13 million. The damages covered underpaid claims and ERISA penalties.
In the case, Humble had an irrevocable assignment of benefits from each member whose claims fell under the lawsuit. This factor was critical in the court’s decision. Providers need to analyze their practices to ensure they obtain a valid assignment of benefits form from patients upon intake, and they need to carefully review their practices to collect patient responsibility payments. Whether a New York court will agree with the Texas court’s Humble reasoning is untested, but providers should undertake a thorough billing, collection, and compliance review to mitigate the risk of insurer overpayment recovery efforts later.