A New Jersey federal judge on Friday approved a $120 million settlement of multidistrict litigation accusing Aetna Inc. of shorting doctors who provided out-of-network medical services, less than five months after the previous judge recused himself from reviewing the deal.
Aetna has agreed to set up a settlement fund of $60 million to cover attorneys’ fees and administrative costs and the claims of medical providers and plan subscribers who met the criteria to be class members but lacked documentation substantiating how much they were owed.
The insurer also agreed to set aside as much as $60 million more for two other “prove-up” funds that providers and plan members could tap into if they had records showing they were owed reimbursement.
U.S. District Judge Katharine S. Hayden, to whom the case was reassigned in mid-April after U.S. District Judge Stanley Chesler recused himself for a conflict of interest, gave preliminary approval to the deal Friday. Judge Chesler stepped aside after realizing that his wife had received insurance benefits through an Aetna plan — which also offered the judge secondary coverage — during the time period covered by the suit, making them members of a proposed class in the MDL.
His replacement, Judge Hayden, said the agreement — reached following 13 in-person mediation sessions — was worthy of approval, notwithstanding the objections of six plaintiffs and those of Ingenix Inc., the company that designed the allegedly flawed databases blamed for the purportedly lacking reimbursement.
“The court is satisfied that the proposed settlement warrants preliminary approval as it falls within the range of reason and is the result of serious, informed negotiations,” Judge Hayden said.
The litigation stretches back to 2007, when plan member Michele Cooper hit Aetna with a proposed class action in New Jersey federal court accusing Aetna of violating the Employee Retirement Income Security Act, the Racketeer Influenced and Corrupt Organizations Act, the Sherman Antitrust Act and state laws.
That action was part of multidistrict litigation against multiple insurers for using databases licensed from United Health Group, Inc., subsidiary Ingenix that all underpaid physicians for out-of-network services. Doctors can bill patients the difference when insurance companies do not entirely cover out-of-network exams and procedures, unlike in-network services, for which physicians must accept the agreed-upon rate from the insurer, regardless of what they would typically charge.
A provider class suit was filed against Aetna by a group of doctors and other health care providers on behalf of thousands of physicians in 2009 and litigated alongside the individual member claims, according to the plaintiffs.
Aside from the claims arising from the errors of the Ingenix database, the plaintiffs also challenged other methods that Aetna used to determine out-of-network reimbursement rates and accused Aetna of failing to disclose how it figured those rates.
In addition to medical plan members, the plaintiffs included the American Medical Association and 10 state medical societies from New Jersey, New York, Connecticut, Texas, North Carolina, Tennessee, Georgia, California, Florida and Washington.
Judge Hayden granted preliminary approval to the deal in spite of objections by United Health and Ingenix, which said the court should refuse to certify the subscriber class because the plaintiffs could not offer classwide proofs that the Ingenix databases were “skewed downward across the board,” meaning they couldn’t satisfy the commonality and predominance requirements for certification, according to the order.
But the court rejected that argument, noting how United and Ingenix weren’t parties to the settlement agreement and the court’s decision on the deal would not constitute a binding finding on the merits of the litigation.
“[P]reliminary approval of the subscriber settlement class does not affect the United defendants and therefore they lack standing to object,” Judge Hayden said.
Six plan members who filed ERISA claims against the insurer also urged the court to shoot down the deal, saying the four named plaintiffs did not represent them and their issues were not typical of the absent class members. One of those representative plaintiffs, John Seney, dropped his claims in September 2009 and he therefore has no “live” action that could be considered for class certification, according to the dissenters.
But the court dismissed their contention as “hyper-technical,” saying Seney’s claims were dismissed without prejudice and they reappeared in an amended complaint after the multidistrict litigation was consolidated.
Aetna spokeswoman Cynthia Michener said Monday the company was pleased that the judge granted preliminary approval, allowing settlement notices to be distributed to the class members.
The case is Cooper v. Aetna Health Inc. Pa., Corp. et al., case number 2:07-cv-03541 before the U.S. District Court for the District of New Jersey.
