Managed Care Litigation: Latest Developments Litigating Issues - - PowerPoint PPT Presentation

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Managed Care Litigation: Latest Developments

Litigating Issues Involving Coverage, Health Reform, Payment Practices and More

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific WEDNES DAY, JUNE 19, 2013

Today’s faculty features:

James W. Boswell, III, Partner, King & Spalding, Atlanta Andrew J. Hefty, Partner, Crowell & Moring, S an Francisco

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MANAGED CARE LITIGATION: LATEST DEVELOPMENTS

Strafford Webinars Strafford Webinars June 19, 2013

Presented by: James W. Boswell Andrew J. Hefty

Topics p

• Hot Topics in Coverage Litigation
• ACA and Essential Health Benefits

A ti S t Di d Liti ti

• Autism Spectrum Disorder Litigation
• Mental Health Parity Litigation
• PPACA‐related Litigation
• Medical Loss Ratio Requirements
• Provider Exclusion from Networks
• Provider Exclusion from Networks
• Out‐of‐Network Reimbursement Trends and Litigation
• UCR Investigations and Litigation
• Alternatives that have Emerged to Replace Ingenix
• Key ERISA Litigation Trends
• Key ERISA Litigation Trends
• Class Action Based on Recoupment Practices
• Special Attorney‐Client Privilege Issues in ERISA Setting
• Developing Law on Equitable Relief Under ERISA
• Antitrust Litigation Targeting Blues Plans’ Geographic Distribution of Markets
• Antitrust Litigation Targeting Blues Plans Geographic Distribution of Markets
• Payor Actions Challenging Provider Waivers of Co‐insurance, Co‐pays and Deductibles
• June 10, 2013 Supreme Court Ruling on Class Arbitration Availability in Managed Care

Dispute

6

Hot Topics in Coverage Litigation Hot Topics in Coverage Litigation

• ACA and Essential Health Benefits
• Autism Spectrum Disorder Litigation
• Mental Health Parity Litigation

Recent Sources Addressing the Scope of Coverage for Mental Health Benefits Coverage for Mental Health Benefits

• Affordable Care Act

C t E ti l H lth B fit hi h i l d h bilit ti i

• Creates Essential Health Benefits, which include habilitative services as

well as mental health & substance abuse, including behavioral health treatment

• Expands requirements of FedMHPA
• Expands requirements of FedMHPA
• Abrogates annual and lifetime limits for “essential health benefits”
• Federal Mental Health Parity Act

S M l H l h P i A

• State Mental Health Parity Acts
• Mental Health Parity Act Litigation
• Autism Litigation and State Autism Legislative Mandates

Autism Litigation and State Autism Legislative Mandates

8

Essential Health Benefits Essential Health Benefits

ACA sets ten broad categories of essential health benefits:

• Ambulatory patient services
• Emergency services
• Hospitalization
• Maternity & newborn care
• Mental health & substance use disorder services, including

b h i l h lth t t t behavioral health treatment

• Prescription drugs
• Rehabilitative & habilitative services and devices

b

• Laboratory Services
• Preventive & wellness services and chronic disease management
• Pediatric services, including oral & vision care

9

Essential Health Benefits Essential Health Benefits

EHB coverage requirements mandatory 1/1/2014 for:

• All health plans offered through Health Insurance Exchanges

All health plans offered through Health Insurance Exchanges

• Small group and individual products offered outside the exchanges, except

“grandfathered plans” – an existing group health plan or health insurance coverage in which a person was enrolled on the date of ACA's enactment

Large employer and self‐insured plans Large employer and self‐insured plans

• Do not need to provide essential health benefits
• But if they fail to provide plans with minimum value, their employees may go

to the insurance exchange and receive premium tax credits. PPACA, Pub. Law No. 111‐

148 § 1401( ) 124 St t 119 (2010) 148, § 1401(a), 124 Stat. 119 (2010)

• Employers may have to pay penalties to the IRS if its full‐time employees

receive these tax credits. Id. § 1411(e)(4)(B)(iii)

• A plan provides minimum value if the total allowed costs of the benefits

provided under the plan is at least 60 percent

Id § 1401( )

provided under the plan is at least 60 percent. Id. § 1401(a)

• Issuers may calculate minimum value using a minimum value calculator to be made

available by HHS and the Internal Revenue Service, complying with any safe harbor established, or certification by an actuary. Id.

10

Essential Health Benefits

February 25 2013 HHS Final Rule (45 CFR §§ 147 155 156) February 25, 2013 HHS Final Rule (45 CFR §§ 147, 155, 156)

States choose one of four benchmark plans to serve as f th t fl t f i d b fit li it f reference that reflects scope of services and benefits limits for plans that cover EHBs:

• The largest plan by enrollment in any of the three largest small

group insurance products in the state’s small group market

• One of the three largest state employee health plans
• One of the three largest federal employee health plans

g p y p

• The largest HMO plan offered in the state’s commercial market
• Default plan if state fails to exercise option: Largest plan by

f p p g p y enrollment in the largest product in the state’s small group market

11

Essential Health Benefits

February 25 2013 HHS Final Rule (45 CFR §§ 147 155 156) February 25, 2013 HHS Final Rule (45 CFR §§ 147, 155, 156)

• Supplementation of benchmark plan
• If benchmark plan lacks any of the ten categories, State or HHS

directed to supplement benchmark plan in that category

• State mandates beyond EHB categories

State mandates beyond EHB categories

• States may require Qualified Health Plan to cover additional benefits

beyond the ten EHB categories The state m st defra the cost to iss er of additional benefit mandates

• The state must defray the cost to issuer of additional benefit mandates

enacted after December 31, 2011

• Protects states from having to subsidize the cost of state mandated

benefits enacted before 2012 that go beyond federally mandated benefits enacted before 2012 that go beyond federally mandated minimum benefits

12

Essential Health Benefits

February 25 2013 HHS Final Rule (45 CFR §§ 147 155 156) February 25, 2013 HHS Final Rule (45 CFR §§ 147, 155, 156)

Prescription Drug Coverage

• Plans must offer the greater of
• One drug in every U.S. Pharmacopeia (USP) category or class; or
• The same number of drugs in each category and class as the essential

health benefits benchmark plan

• Health plan providing essential health benefits must

p p g have procedures that allow enrollee to request clinically appropriate drugs not covered by the plan

13

Essential Health Benefits

February 25 2013 HHS Final Rule (45 CFR §§ 147 155 156) February 25, 2013 HHS Final Rule (45 CFR §§ 147, 155, 156)

Actuarial Value

F f d t i i h th l ff ti l h lth b fit

• For purposes of determining whether a plan offers essential health benefits,

the final rule contains requirements for health insurance issuers to determine actuarial value

• Actuarial Value (AV) is a measure of the percentage of expected health care

costs a health plan will cover for a standard population. For example, if plan has an AV of 60 percent, patient would be responsible for 40 percent of the cost of benefits covered by the plan

• Beginning in 2014, health plans must meet an AV that matches up to a

Beginning in 2014, health plans must meet an AV that matches up to a specified level of coverage – bronze (60 percent), silver (70 percent), gold (80 percent), or platinum (90 percent).

• Rule permits a plan to qualify for a particular "metal level" if the difference in

the true dollar value is within 2 percentage points the true dollar value is within 2 percentage points.

14

Essential Health Benefits

February 25 2013 HHS Final Rule (45 CFR §§ 147 155 156) February 25, 2013 HHS Final Rule (45 CFR §§ 147, 155, 156)

Non‐Discrimination in Essential Health Benefits

l l h b b f d h l l f b f d h

• Final Rule: prohibits benefit design, or the implemental of benefit design, that

discriminates based on an individual's age, expected length of life, present or predicted disability, degree of medical dependency, quality of life, or other health conditions. Id. § 156.125(a) ea t co d t o s d § 56 5(a)

• PHSA § 1302: In defining essential health benefits, the Secretary

shall: “ k d d b

• “not make coverage decisions, determine reimbursement rates,

establish incentive programs, or design benefits in ways that discriminate against individuals because of their age, disability, or expected length of life”

• “ensure that health benefits established as essential not be

subject to denial . . . on the basis of the individuals’ age or expected length of life or of the individuals’ present or predicated disability degree of medical dependency or quality of life disability, degree of medical dependency, or quality of life

15

Essential Health Benefits Essential Health Benefits

• What about Utilization Review Criteria?

Alcoholism as a criteria for liver transplants?

• Alcoholism as a criteria for liver transplants?
• Advanced age as a criteria for transplants or major surgery?
• Expected length of survival or quality of life as criteria for

p g q y transplants?

• End of life decisions such as DNR?
• Permissible to use improvement as basis for medical necessity?
• Will the Act alter criteria used in the practice of medicine and in

utilization review?

• Permissible to distinguish “coverage” as an insurance policy term

versus individual medical/utilization decisions?

16

Essential Health Benefits

February 25 2013 HHS Final Rule (45 CFR §§ 147 155 156) February 25, 2013 HHS Final Rule (45 CFR §§ 147, 155, 156)

• Habilitative services
• Many plans do not identify habilitative services
• States may define these services if they are not included in benchmark plan
• If state does not define habilitative services, issuers must provide coverage at

parity with rehabilitative services or as determined by the issuer and reported to HHS

• Example of Habilitative Services Definition: California SB 951
• Medically necessary health care services that assist in acquiring or

improving skills and functioning necessary to address a health condition, and needed for functioning in interaction with an i di id l’ i t individual’s environment

• Excluding: respite care, day care, recreational care, residential

treatment, social services, custodial care, or education services of any ki d i l di b t t li it d t ti l t i i kind, including, but not limited to, vocational training

17

Federal Mental Health Parity Act of 1996 (29

U S C § 1185a; 42 U S C § 300gg 26) U.S.C. § 1185a; 42 U.S.C. § 300gg‐26)

• Effective January 1, 1998
• Applied to employer‐sponsored group health plans
• Did not apply to individual insurance market, small employers

between 2 and 50 employees group plans that experienced between 2 and 50 employees, group plans that experienced at least a 1% cost increase from compliance

• Required parity in annual and lifetime limits between

medical/surgical and mental health benefits for plans that

• ffered both types of benefits
• Did not mandate that plans offer coverage for mental health

Did not mandate that plans offer coverage for mental health benefits at all

18

State Mental Health Parity Acts State Mental Health Parity Acts

• States enacted their own parity legislation
• Parity acts varied by state
• Some limited parity to certain enumerated mental
• Some limited parity to certain enumerated mental

health conditions

• Annual and lifetime limits
• Financial and non‐financial treatment limitations
• Exclusion of certain plan types
• Exclusion of certain plan types

19

2008 FedMHPA Expands Coverage Mandates p g

2008 Mental Health Parity And Addiction Equity Act (26 USC ) § 9812; 29 USC § 1185a; 42 USC § 300gg‐26)(Effective October 3, 2009)

• Applies to plans sponsored by private and public sector

employers with more than 50 employees, including self‐insured p y p y , g and fully‐insured arrangements, and health insurance issuers who offer or provide coverage to employers with more than 50 employees employees

• Exempt: individual insurance market; employers with 50 or

fewer employees A i h h 1996 MHPA d i h l h l

• As with the 1996 MHPA, does not require group health plan to

provide mental health benefits

• Extends parity to substance use disorder benefits

20

2008 FedMHPA Expands Coverage Mandates p g

2008 Mental Health Parity And Addiction Equity Act (26 USC ) § 9812; 29 USC § 1185a; 42 USC § 300gg‐26)(Effective October 3, 2009)

• Required that treatment limitations and financial requirements

for mental health and substance use disorder benefits be no more restrictive than those for medical and surgical benefits

• Treatment limitations: limits on frequency of treatment, number of visits, days of

coverage, or other limits on scope and duration of treatment

• Financial requirements: deductibles, co‐payments, coinsurance, and out‐of‐pocket

expenses, excluding annual and lifetime limits

• Required parity in coverage by out‐of‐network providers for

d/ d l h l h/ b di d b fi med/surg and mental health/substance use disorder benefits

21

FedMHPA Joint Regulations Broaden Concept of “treatment limitations” (75 FR 5410 Feb 2 2010) “treatment limitations” (75 FR 5410, Feb. 2, 2010)

• Statute: Treatment limitation includes limits on the frequency of

treatment, number of visits, days of coverage or similar limits on , , y g the scope or duration of treatment

• Regulations expand treatment limitations to

nonqualitative treatment limitations, 45 CFR § 146.136(c)(4)(ii):

• Any processes, strategies, evidentiary standards, or other factors

used in applying the nonquantitative treatment limitations with respect to mental health or substance use disorder benefits must be respect to mental health or substance use disorder benefits must be comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in applying the limitation with respect to medical/surgical benefits, except to the extent that recognized clinically appropriate standards of care may extent that recognized clinically appropriate standards of care may permit a difference

22

FedMHPA Joint Regulations Broaden Concept of “treatment limitations” (75 FR 5410 Feb 2 2010) “treatment limitations” (75 FR 5410, Feb. 2, 2010)

• Potentially problematic nonquantitative

t t t li it ti treatment limitations:

• Different standards for determining medical

necessity or whether the treatment is necessity or whether the treatment is experimental or investigative

• Requiring concurrent review for mental health

q g conditions, but only retrospective review of med/surg conditions Diff t t d d f id d i i t

• Different standards for provider admission to

network

23

ACA Expands Mental Health Benefits Beginning i 2014 in 2014

• February 25, 2013 Final Rule for Essential Health

Benefits:

• Beginning in 2014, non‐grandfathered health

plans in the individual and small group markets must

• Cover mental health and substance use disorder services as

part of the package of Essential Health Benefits.

• Comply with requirements of the FedMHPA in covering

p y q g mental health and substance use disorder services included in Essential Health Benefits.

24

ACA Abrogates Lifetime and Annual Limits Beginning in 2010 Beginning in 2010

• ACA prohibits lifetime limits on essential health benefits for group health plans

and a health insurance issuer offering group or individual health insurance i d d ft S t b 23 2010 42 USC §300 coverage issued or renewed on or after September 23, 2010. 42 USC §300gg‐ 11

• ACA restricts and phases out annual limits for essential health

benefits for all group health plans and health insurance issuers

• ffering group or individual health insurance coverage issued or

renewed after March 23, 2010

• Plan year or policy year 9/23/10 to 9/22/11: Annual limit less than $750,000 prohibited
• Plan year or policy year 9/23/11 to 9/22/12: Annual limit less than $1.25 million prohibited
• Plan year or policy year 9/23/12 to 1/1/14: Annual limit less than $2 million prohibited
• January 1, 2014: Annual dollar limit prohibited

D t l t “ df th d” i di id l l

• Does not apply to “grandfathered” individual plans
• Eliminates FedMHPA rules permitting parity in annual and lifetime limits for any essential health

benefits

25

Autism and Other Behavioral Health Services Suits Suits

• Medical services for ASDs are covered
• ABA often excluded as:
• Experimental

b l /

• Habilitative/non‐restorative
• Non health care (educational)
• Not provided by licensed providers
• Not provided by licensed providers
• ST/OT treatments for ASD often excluded as:
• Habilitative/non‐restorative
• Habilitative/non‐restorative
• Non health care (educational)

26

ASD Class Actions

• Johns v. Blue Cross Blue Shield of Michigan, E.D. Mich, No.

08‐12272 08 12272

• ABA Coverage denied as experimental
• Court denied class certification for lack of evidence of typicality

and adequacy, as plan terms on exclusions could differ among putative class members’ plans (March 2009)

• Settled in June 2009, but provided no prospective relief, and

, p p p , settlement class redefined. Reimbursement of all class members who paid for ABA from May 2003 through June 2009. Nearly 100 families received almost $1 million in aggregate Nearly 100 families received almost $1 million in aggregate reimbursement

27

ASD Class Actions

• Potter v. Blue Cross Blue Shield of Michigan, E.D. Mich.,

No 10‐14981

• No. 10 14981
• ABA Coverage denied as experimental
• Court rejected BCBS’s failure to exhaust argument, because of BCBS’s alleged

policy that ABA treatment is experimental policy that ABA treatment is experimental

• Court certified entire requested class, finding that the common issue for the

class, whether ABA could be denied as experimental, predominated over individual damages issues

• Cross‐motions for SJ filed on whether ABA is experimental
• Court denied BCBS’s SJ motion and granted Plaintiffs’ SJ motion on March 30,

2013

• Court ordered that BCBS’s characterization and exclusion of ABA therapy as experimental or

investigative, as applied to the claims of the class members, was, and is, arbitrary and capricious

• Court remanded the class members’ claims for coverage of ABA therapy to BCBS for

readministration readministration

28

Additional ASD Class Actions dd t o a S C ass ct o s

• Arce v. Kaiser Foundation Health Plan, Superior Court of the State
• f California, County of Los Angeles, JCCP 4585: Certification

, y g ,

• granted. Kaiser MSJs pending based on (1) mootness in light of

newly enacted ASD services mandate bill (SB 946) and (2) exclusion

• f members of government plans subject to exclusive

administrative remedies.

• Churchill v. CIGNA Corp., 2011 WL 356489 (E.D. Pa. 2011):

p , ( ) Certification granted for class of persons actually denied ABA on the grounds that it is experimental

• Graddy v. Blue Cross Blue Shield of Tennessee, Inc., 2010 WL

670081 (E.D. Tenn. 2010): Certification denied for overbroad class

29

ASD Merits Ruling: Denial of ABA on experimental & non‐licensure bases:

D.F., et al. v. Washington State Health Care Authority, Superior Court of Washington for King County, No. 10‐2‐29400‐7 SEA

• Washington State Health Care Authority (HCA) contended that there was no scientific

evidence establishing a significant improvement in children who have undergone ABA th d it i t d b it i id d b li d id therapy, and it is not covered because it is provided by unlicensed providers

• Class action suit brought under Washington MHPA, which provides that all health benefit

plans offered by health maintenance organizations that provide coverage for medical and surgical services shall provide: . . . (c) For all health benefit plans delivered, issued for delivery, or renewed on or after July 1, 2010, coverage for (i) Mental health services. . . .

• Suit sought declaratory and injunctive relief requiring HCA to cover ABA for children with

autism when medically necessary

• Court found:

Court found:

• ABA is beneficial for some children
• HCA not in compliance with Washington MHPA insofar as it imposes a blanket exclusion of ABA, even

when provided by licensed therapists

• Court could not determine as matter of law that HCS is required to cover ABA provided by certified
• Court could not determine as matter of law that HCS is required to cover ABA provided by certified
• r registered providers, because it was not clear from record if HCA covers health services provided

by counselors or therapists who hold certifications or registrations, but not licenses

• It was also not clear whether a national certification by ABA providers is equivalent to certifications

for providers of mental health services covered by HCA

30

ASD Merits Ruling: Denial of ABA on experimental, educational, and non‐

licensure bases: McHenry v. Pacificsource Health Plans, 679 F.Supp.2d 1226 (D. Oregon 2010)

• ERISA plan administrator denied coverage for ABA based on plan exclusion for

experimental treatments, and academic or social skills training, and because the ABA provider, a BCBA, was not a medically trained clinician

• Court held that ABA “is not an experimental or investigational procedure” and

rejected denial on that ground rejected denial on that ground

• Court found that exclusion for educational intervention did not apply because it
• nly applied if provided by a school or halfway house, and plaintiff’s services were

provided by a private company p y p p y

• Court found that ABA is not primarily academic or social skills training, and

rejected denial on that ground

• BUT: Court upheld denial of coverage because there was no evidence that a non‐

licensed, but BCBA‐certified provider, qualified as an eligible provider authorized for reimbursement under Oregon law

31

ASD Merits Ruling: Denial of ABA as educational, not medically necessary,

and not medical service: Hummel v. Ohio Dept. of Job & Family Serv., 844 N.E.2d 360 (Ohi Ct A 2005) 360 (Ohio Ct. App. 2005)

• Plaintiff with autism eligible to receive benefits through Medicaid program administered by

Ohi D f J b & F il S i Ohio Department of Job & Family Services

• Treating physician found that ABA was medically necessary
• Local provider rejected request for ABA as neither medically necessary nor a medical service.

State hearing upheld local provider g p p

• Common pleas court reversed, and State department appealed on grounds that ABA was not

a reimbursable “medical service” but rather an educational program or behavior modification technique

• Court of Appeal affirmed common pleas court:
• Court of Appeal affirmed common pleas court:
• Treating physician classified ABA as medically necessary, and other reports and articles suggested

that ABA was generally accepted and appropriate for treating autism

• Medical service is a synonym for medically necessary service. Alternatively, meaning assigned to

“medical services” through ordinary usage would be an act helpful to healing or treatment medical services through ordinary usage would be an act helpful to healing or treatment

• “Medically necessary service” encompasses “medical service,” and court of common pleases did not

err in determining that ABA qualified for reimbursement

32

ASD Merits Ruling: Denial of ST, PT, and OT as educational, developmental

and non‐restorative: Markiewicz v. State Health Benefits Comm., 390 N.J. Super. 289, 915 A.2d

553 (N.J. App. 2007); Micheletti v. State Health Benefits Comm., 389 N.J. Super. 510, 913 A.2d 842 (N.J. ( pp ); , p , (

• App. 2007)
• Cases concerned denial by State Health Benefits Commission (“SHBC”) of ST, PT and OT for two

children, one with autism and one with PPD‐NOS, on grounds that services were excluded as educational, developmental, or non‐restorative

• State 1999 MHPA required SHBC to cover biologically‐based mental illness (“BBMI”) under the

same terms as provided for any other sickness under contract

• Court rejected SHBC’s position that coverage for PT OT and ST could be excluded as educational
• Court rejected SHBC s position that coverage for PT, OT and ST could be excluded as educational,

developmental or non‐restorative services on grounds that such exclusions applied equally to mental and physical conditions

• Court held that parity act mandated coverage for ST, PT and OT for autism and PPD
• Court found persuasive insurance regulation under private insurer parity law, which regulation

prohibited carriers from applying any exclusion in a health insurance policy for services medically necessary for the treatment of covered persons with BBMIs, specifically listing exclusions for non‐restorative PT, OT and ST, and for treatment of developmental disorders or developmental delay

• Court found that denying coverage would be unreasonable and contrary to purpose of the

parity act

33

ASD Merits Rulings: Denial of ST as habilitative/non‐restorative: Z.D. by and

through J.D. and T.D., et al v. Group Health Co‐op, W.D. Wash., No. 2:11‐cv‐01119‐ RSL RSL

• Class action against Group Health Options, which insures and administers

Washington ERISA plans. GHO denied coverage for ST for plaintiff, who had speech delays, at age 7

• Plan covered therapy to “restore function following illness, injury or

surgery”

• Plan excluded therapy for “degenerative or static conditions when the

expected outcome is primarily to maintain the Member’s level of functioning,” excepting coverage under the “Neurodevelopmental Therapies for Children Age Six (6) and Under” Subsection

• Court granted SJ for plaintiff. (June 1, 2012). State MHPA “plainly imposes

a baseline coverage requirement” requiring coverage for medically necessary treatment for DSM mental health conditions “without any regard for whether that treatment is restorative or non‐restorative.”

34

ASD Merits Rulings: Experimental and habilitative denial of ABA addressed

in granting injunction: K.G. by Garrido v. Dudek, 839 F.Supp.2d 1254 (S.D. Fla. 2011); K.G. by

Garrido, et al. v. Dudek, 2012 WL 1438974 (S.D. Fla. 2012)

• Florida Medicaid agency (AHCA) denied ABA as experimental and non‐

restorative/habilitative restorative/habilitative

• Suit based on Medicaid mandate for “early and periodic screening, diagnostic and

treatment services” (EPSDT) for children under age 21. 42 U.S.C. § 1396a(a)(10)(A)

• EPSDT catchall provisions requires coverage of “other necessary health care, diagnostic services, treatment,

and other measures [described in § 1396d(a)] to correct or ameliorate defects and physical and mental [ § ( )] p y illnesses.” 42 U.S.C. § 1396d(r)(5)

• §1396d(a)(13) requires coverage of “other diagnostic, screening, preventive, and rehabilitative services,

including any medical or remedial service . . . recommended by a physician or other licensed practitioner . . . for the maximum reduction of physical or mental disability and restoration of an individual to the best possible functional level.”

• Court found plaintiff had regressed and ABA was needed to restore to prior functional

level

• However, citing Parents League for Effective Autism Services, 565 F.Supp.2d 905 (S.D. Ohio 2008), court noted

that other courts interpreting §1396d(a)(13) found that it does not require restoration of previously achieved f l l l b l h l d l f d d ll h l functional level, but only requires that licensed clinician find service medically necessary to help improve functional level

• AHCA acted unreasonably in determining that ABA is experimental
• Court granted injunction requiring AHCA to provide ABA

35

Suits Under FedMHPA: New York State Psychiatric Association, Inc.

• v. UnitedHealth Group, No: 1:13‐cv‐01599‐CM (S.D.N.Y. filed Mar. 11, 2013)
• Putative class action brought by NY Psychiatric Association on behalf of members and

their patients, as well as individual plaintiffs, alleging violations of the FedMHPA

• Allegations:

– United allegedly applies different medical necessity definitions to mental health care than to medical/surgical care – United allegedly imposes preauthorization and concurrent review requirements on mental health services that are not imposed on analogous medical/surgical services – United allegedly applies proscribed fail first policies and step therapy protocols to mental health treatments at all levels of care With respect to one plan United allegedly applies a categorical exclusion of out of network residential – With respect to one plan, United allegedly applies a categorical exclusion of out‐of‐network residential treatment for mental health and substance abuse, when the medical‐surgical portion of the plan provides for the full scope of out‐of‐network, inpatient services to treat medical‐surgery conditions – United allegedly reimburses services rendered by mental health professionals at lower rates than identical services rendered by non‐mental health providers – With respect to one plan, United allegedly applies precertification policies to outpatient mental health services that are not comparable to and are more stringent than the policies for medical/surgical services – United allegedly limits access to psychotherapy, which imposes limits on mental health care more stringent than limits on analogous medical/surgical services

36

Suits Under FedMHPA: American Psychiatric Association v. Anthem

Health Plans, Inc., No: 3:13‐cv‐00494 (Conn. Filed Apr. 10, 2013)

• Action brought by the American Psychiatric Association, Connecticut Psychiatrist

Society and Connecticut Counsel of Child and Adolescent Psychiatry on behalf of their members and their patients

• Alleged violation of FedMHPA through imposition of quantitative and non‐quantitative

treatment limitations on mental health benefits not imposed on, or imposed in manner t eat e t tat o s o e ta ea t be e ts ot posed o , o posed a e not comparable and/or more stringent than, those for non‐mental health benefits, including:

• Alleged disparity in rates between mental health and medical/surgical services
• Alleged failure to recognize CPT codes for certain mental health services
• Alleged imposition of double co‐payments on psychiatric patients
• Alleged reduction in rates for certain mental health services
• Alleged failure to pay for psychotherapy for psychiatric physicians

37

Suits Under State MHPA: Harlick v. Blue Shield of California,

686 F.3d 699 (9th Cir. 2012)

• Plaintiff diagnosed with anorexia nervosa. Was denied coverage for residential

treatment under an exclusion in ERISA plan that applied to both physical and mental care

• Ninth Circuit found that the residential exclusion was unambiguous, so that coverage

was not available under the Plan document as ot a a ab e u de t e a docu e t

• However, Ninth Circuit found coverage under the California MHPA by concluding that

the MHPA “mandates that a plan provide all medically necessary treatment,” even if such treatment is not covered for physical conditions. 686 F.3d at 712‐13, 715‐16.

• The only “parity” that MHPA requires is for the financial limitations like copays and

deductibles

• Harlick rejected by one California state court: Rea v. Blue Shield of California, Superior

Court of the State of California, County of Los Angeles, No. BC468900, Order Sustaining Court of the State of California, County of Los Angeles, No. BC468900, Order Sustaining Defendant’s Demurrer to First Amended Complaint (June 13, 2012)

38

Many Sources Acting Collectively to Expand Coverage

• f Mental Health Benefits
• f Mental Health Benefits
• Affordable Care Act
• Creates Essential Health Benefits that mandates coverage for
• mental health and substance use disorder services, including behavioral health

treatment

• habilitative services and devices
• Expands requirements of FedMHPA
• Abrogates annual and lifetime limits for “essential health benefits,”

effectively eliminating FedMHPA rules permitting parity in annual and lifetime limits for any “essential health benefits”

• State and Federal Mental Health Parity Acts and Related
• State and Federal Mental Health Parity Acts and Related

Litigation

• Autism Litigation and State Autism Legislative Mandates
• Questions raised regarding types of services:
• Questions raised regarding types of services:
• Residential treatment facilities; unlicensed providers; custodial care

39

PPACA‐related Litigation g

• Medical Loss Ratio Requirements
• Provider Exclusion from Networks

40

Medical Loss Ratio Under ACA Medical Loss Ratio Under ACA

• ACA MLR Summary:

y

• Health insurance issuers offering group or individual health

insurance coverage are required to report their MLR each year g q p y

• Minimum MLR for large group market – 85%
• Minimum MLR for individual market and small group market –

80%

• States are free to adopt higher minimum MLRs
• New York, for example, set an 82% minimum MLR

HHS S t dj t th i i MLR f i di id l

• HHS Secretary may adjust the minimum MLR for individual

market to prevent destabilization

Medical Loss Ratio Under ACA Medical Loss Ratio Under ACA

• Reporting & Notice
• All health insurance issuers must report to HHS by June 1
• Notice to policyholders of MLR rebate by August 1
• Health insurance issuers that fail to meet the

minimum MLR required to provide rebates to employer (or policyholder) p y ( p y )

• Statutory Provision: PHSA § 2718
• Key Regulations: 45 CFR §§ 158.110‐606

ACA Commercial MLR Overview ACA Commercial MLR Overview

Incurred Claims (including Change in Contract Reserves) + Quality

ACA MLR

Improvement Expenses Earned Premiums – Federal Taxes – Credibility Adjustment (State Taxes, Assessments, Fees)

Penalties for Non‐Compliance Penalties for Non Compliance

• Civil monetary penalties
• $100/day for each responsible entity for each

individual affected by the violation

• No private right of action expressly created under

the ACA for failure to meet the minimum MLR or pay a rebate

Medical Loss Ratio: National Trends Medical Loss Ratio: National Trends

• HHS Secretary may adjust the minimum 80% MLR for individual market if

necessary to prevent destabilization y p

• Waivers Rejected
• Ten states and one territory (Wisconsin, Delaware, Florida, Indiana, Kansas,

Louisiana, Michigan, North Dakota, Oklahoma, Texas, and Guam) had their f i j d d h di l l i ld requests for waivers rejected on grounds that medical loss ratio would not destabilize states’ individual insurance markets

• Waivers Granted

S t t (G i I K t k M i N d N H hi d

• Seven states (Georgia, Iowa, Kentucky, Maine, Nevada, New Hampshire, and

North Carolina) had waiver requests granted or partially granted

• HHS announced June 21 2012 that rebates of $1 1 billion would

HHS announced June 21, 2012 that rebates of $1.1 billion would be paid to 12.8 million policyholders by August 1, 2012

45

Medical Loss Ratio Medical Loss Ratio

• Key Defenses to Private Litigation
• No Private Right of Action
• See GAO Report, Document No. B‐322525 (March 23, 2012)
• Filed Rate Doctrine
• Filed Rate Doctrine
• Are the rebates a “rate”?
• “Rebates are essentially a retrospective adjustment or correction to

premiums” p

• MLR allocations used in initial rate review?
• Is there agency review and approval of rebates?
• Abstention / Primary Jurisdiction
• Abstention / Primary Jurisdiction
• Administrative MLR Hearings?
• Judicial review proceedings of agency MLR decisions?

46

MLR Case Study: U S v Farha et al (M D Fla 2011) U.S. v. Farha, et al. (M.D. Fla. 2011)

• March 2011: Five former Wellcare executives indicted

– Allegations involve Florida Medicaid’s 80% MLR Rebate Requirement for behavioral – Allegations involve Florida Medicaid s 80% MLR Rebate Requirement for behavioral health care services provided by managed care plans

• Executives alleged to have fraudulently reduced MLR refund by:

– Including fraudulent information in worksheets submitted to Medicaid g – Improperly including expenditures for certain types of health care services in Behavioral Health Care Worksheet submitted to Medicaid – Creating a wholly‐owned, capitated provider to conceal costs and increase d d d d expenditures reported to Medicaid – Issuing approx. $1 million rebate based on inconsistent and improper methodologies across various reporting periods to avoid scrutiny – Failing to respond truthfully to the Medicaid program’s request for information Failing to respond truthfully to the Medicaid program s request for information regarding MLR

47

MLR Case Study: U S v Farha et al (M D Fla 2011) (cont’d ) U.S. v. Farha, et al. (M.D. Fla. 2011) (cont’d.)

• Indictments of executives follow:

2008 l t b f W llC l d

• 2008 plea agreement by a former WellCare employee and
• 2009 Deferred Prosecution Agreement entered into by

WellCare with United States Attorney

• $40 million in restitution
• Forfeited an additional $40 million
• Executed Corporate Integrity Agreement with OIG that
• Executed Corporate Integrity Agreement with OIG that

places compliance obligations for five years

• The Government concluded that WellCare complied

with all requirements of the DPA and dismissed the criminal information

48

MLR Case Study: U S v Farha et al (M D Fla 2011) (cont’d ) U.S. v. Farha, et al. (M.D. Fla. 2011) (cont’d.)

• Jury verdicts announced on June 10, 2013 after weeks of

d lib ti deliberations

49

MLR Case Study: U S v Farha et al (M D Fla 2011) (cont’d ) U.S. v. Farha, et al. (M.D. Fla. 2011) (cont’d.)

• Jury verdicts announced on June 10, 2013

il di ifi d i l h d i i l – Guilty verdicts on specified counts, acquittals on others, and mistrial

• n still others

– Former CEO Todd Fahra convicted on two counts of health care fraud – Former CFO Paul Behrens convicted on two counts of making false statements and two counts of health care fraud – Former Vice President of Harmony Behavioral Health Bill Kale convicted of two counts of health care fraud – Former Vice President of Medical Economics Peter Clay convicted of two counts of making false statements to a law enforcement officer

• Defendants have not yet been sentenced.

50

MLR ‐ Litigation Risks i l ( l ) MRI Scan Center v Cigna et al (S.D. Fla. 2013)

• Lawsuit brought by a provider as assignee, not

by a beneficiary y y

• Based on alleged ERISA violations
• Allegedly motivated by desire to falsely increase

Allegedly motivated by desire to falsely increase MLR for PPACA MLR reporting purposes

MLR ‐ Litigation Risks MRI Scan Center v Cigna et al (S.D. Fla. 2013)

$1 850 Billed Charges Intermediaries Plaintiff MRI Scan Center $1,850 Billed Charges $ 325 Contract Rate Intermediaries (National Imaging Associates and Medsolutions) EOP: $ 325

∆

$ 8

CIGNA

EOB: $ 473

∆ = $ 148 Beneficiary

$ 325 paid

Beneficiary

$ 473 Credit to Deductible

MLR ‐ Litigation Risks MRI Scan Center v Cigna et al (S.D. Fla. 2013)

• May 6, 2013 ‐ Court granted motions to dismiss
• Plaintiff provider lacked standing under ERISA
• Plaintiff provider lacked standing under ERISA
• Assignment of benefits limited only to payment for

services

• Claims against the intermediary National Imaging

Associates are subject to arbitration per contract

• Court does not address the issue of MLR

accounting for intermediaries

MLR ‐ Litigation Risks A Chi ti A ’ Ci (E D P 2012)

• Plaintiffs include a Beneficiary as well as a
• Amer. Chiropractic Ass’n v Cigna (E.D.Pa. 2012)

provider and the provider association

• Allege improper MLR reporting based on

intermediary provider network

• Motions to Dismiss Pending (filed 3/26/13)
• Lack of Standing
• E.g., plaintiff is an ASO beneficiary, not subject to MLR

h f d

• No private right of action under MLR statute
• Failure to Exhaust Remedies

F il b l i tiff t ll h

• Failure by any plaintiff to allege harm

54

MLR ‐ Litigation Risks A Chi ti A ’ Ci (E D P 2012)

$160 Billed Charges

• Amer. Chiropractic Ass’n v Cigna (E.D.Pa. 2012)

Plaintiff Chiropractor $160 Billed Charges $ 88 Contract Rate Intermediary American Specialty Health EOP: $ 88

∆

$ 39

CIGNA

EOB: $ 127

∆ = $ 39 Plaintiff Beneficiary

$ 127 Credit to Deductible

Plaintiff Beneficiary

$ 127 Credit to Deductible

Provider Exclusion from Networks Provider Exclusion from Networks

• Typical vehicles to address:

– State any willing provider laws – Federal antitrust laws – Unfair and Deceptive trade practices laws – Tortious interference (with patient relationships) ( p p )

• Is PPACA another weapon in the arsenal of

providers? providers?

PPACA Prohibition on Discrimination Against Providers g

• SEC. 2706 NON‐DISCRIMINATION IN HEALTHCARE

(a) PROVIDERS. ― A group health plan and a health insurance ( ) g p p issuer offering group or individual health insurance coverage shall not discriminate with respect to participation under the plan or coverage against any health care provider who is acting within the scope of that provider’s license or certification under applicable scope of that provider s license or certification under applicable State law. This section shall not require that a group health plan or health insurance issuer contract with any health care provider willing to abide by the terms and conditions for participation bli h d b h l i hi i hi i h ll b established by the plan or issuer. Nothing in this section shall be construed as preventing a group health plan, a health insurance issuer, or the Secretary from establishing varying reimbursement rates based on quality or performance measures. rates based on quality or performance measures.

57

PPACA Prohibition on Discrimination Against Providers g

• Applicability

– Non‐grandfathered group health plans and health insurance Non grandfathered group health plans and health insurance issuers – Plan years (or policy years) beginning on or after 1/1/2014

• Because DOL also has joint responsibility with HHS for

j p y interpretation of § 2706 due to its incorporation into ERISA, DOL issued a FAQ on § 2706 on April 29, 2013

– “The statutory language of PHS Act section 2706(a) is self‐implementing” “U til f th id i i d h lth l d h lth – “Until any further guidance is issued, group health plans and health insurance issuers offering group or individual coverage are expected to implement the requirements of PHS Act section 2706(a) using a good faith, reasonable interpretation of the law.”

l l h b bl h d h b f ’

• Similar language has been published on the website of CMS’s

Center for Consumer Information and Insurance Oversight

58

PPACA Prohibition on Discrimination Against Providers g

• We know more about what § 2706 isn’t than what it is.
• What § 2706 isn’t:

– An any willing provider law – A mechanism to regulate provider rates A i t t “ t ll t f id i t t k” (4/29/2013 DOL FAQ t 3 ) – A requirement to “accept all types of providers into a network” (4/29/2013 DOL FAQ at 3.)

• What § 2706 is:

– A prohibition on discrimination “based on a provider’s license or certification” (Id.) A provision that chiropractors can invoke if the plan only covers orthopedists? – A provision that chiropractors can invoke if the plan only covers orthopedists? – A boost for alternative medicine practitioners, such as acupuncturists? – A broadly worded non‐discrimination statute (“shall not discriminate with respect to participation under the plan or coverage against any health care provider who is acting within th f th t id ’ li tifi ti ”) th t t d t l k the scope of that provider’s license or certification . . .”) that to date lacks necessary agency interpretation

59

Out‐of‐Network Reimbursement T d d Liti ti Trends and Litigation

• UCR Class Actions
• Alternatives that have Emerged to

Replace Ingenix

60

U&C PRICING & DATABASES

61

AHIP’ R t S l AHIP’s Recent Salvo

“For consumers who choose to seek care out‐of‐network, [AHIP’s] latest survey shows that the charges billed by some out‐of‐network providers can exceed several hundred or several thousand percent of h t M di ld i b f th i i th what Medicare would reimburse for the same service in the same area.”

62

AHIP’s Argument AHIP s Argument

63

Out‐of‐network Reimbursement Out of network Reimbursement

Payment Measures Billed Charges “Usual, Customary and Reasonable”

• r “UCR”

In-network rates Percent of Medicare

• Ingenix

F i H lth

• Fair Health

64

Out‐of‐network Reimbursement Out of network Reimbursement

• Common scenarios

E D t t i – Emergency Department services – Patients with non‐emergent hospital stays who encounter non‐contracted providers without knowing in advance of non‐contracted status

• Common issue but significant recent movement

– Many (most?) payors have changed payment benchmark in Many (most?) payors have changed payment benchmark in past 3‐4 years – New PPACA standards with respect to emergency services and preventive services that are unavailable in network and preventive services that are unavailable in‐network

65

New York Attorney General Investigation New York Attorney General Investigation y g y g

• Announced Feb 13 2008

Announced Feb. 13, 2008

• Findings Issued Jan. 13,

2009

• “Assurance of

Discontinuance” (of use

• f Ingenix) with United
• f Ingenix) with United

executed simultaneously

66

Rockefeller Committee Investigation Rockefeller Committee Investigation Rockefeller Committee Investigation Rockefeller Committee Investigation

• Follow‐on to the NYAG

Follow on to the NYAG investigation

• Senate Commerce

Committee held two Committee held two hearings in 3/09

• Senator Rockefeller sent

i f 18 info requests to 18 insurers not covered by NYAG settlements

67

Pending UCR Litigation Pending UCR Litigation

• In re WellPoint, Inc. Out‐of‐Network “UCR” Rates

( l ) Litigation, No. MDL 09‐2074 (C.D. Cal.)

• Franco v. CIGNA, No. 2:07‐cv‐06039 (D.N.J.)
• McDonough v. Horizon Blue Cross, No. 2:09‐cv‐571

(D.N.J.)

68

Factual basis for the claims Factual basis for the claims

• Plaintiffs allege “flawed data”. Allegations:

P i i i i “ b” h i d b i hi h – Participating insurers “scrub” their data by removing high‐ value claims – Ingenix removes “high‐end” values as statistical outliers – Ingenix fails to tabulate data accurately according to geographic area – Insurers do not verify the accuracy of the data Insurers do not verify the accuracy of the data

• Plaintiffs’ conclusions:

– Insurers violated contractual obligations to pay UCR – Insurers knowingly participated in the manipulation of UCR data

69

Common legal theories alleged Common legal theories alleged

• Antitrust
• RICO
• ERISA

ERISA

– Claim for benefits Breach of fiduciary duty – Breach of fiduciary duty

70

Status of Cases Status of Cases

• Wellpoint UCR MDL

– Motion to dismiss fourth amended complaint pending (hearing held 6/12/2013)

• Franco v Cigna
• Franco v. Cigna

– Plaintiffs currently pursuing appeal to 3rd Circuit of 1/16/2013 order denying class certification / / y g

• McDonough v. Horizon Blue Cross

– Class certification and cross‐motions for summary judgment pending

71

Out‐of‐Network Reimbursement Alternatives That Are Emerging to Replace Ingenix

72

Fair Health Created To Replace Ingenix

• As settlement of NY AG Investigation:

– Agreement to shut down Ingenix PHCS and MDR databases – Independent non‐profit entity formed to create and administer medical claims database medical claims database – FAIRHealth works with group of academics (Upstate Health Research Network) based at Syracuse University i l h d i ll b S f k i ll b – FairHealth supported partially by State of New York, partially by product sales [Insurers paid $95 million to New York in connection with NYAG settlements] – Release of replacement modules began 2011

73

Fair Health

• How do results produced through Fair Health methodology differ

f I i ? from Ingenix?

• According to http://www.fairhealthconsumer.org,

– “The [Upstate Health Research Network’s] testing of the adjusted calculations across all these different procedures and adjusted calculations across all these different procedures and services showed varied results. Sometimes the results calculated using the UHRN methodology were higher than those calculated using Ingenix’s methods, often times they were g g y lower, and sometimes they were the same. But generally the UHRN believes that applying the new methodology can enhance the completeness of the data and the transparency of its development ” development.

74

Payment Methodologies Post‐Ingenix y g g

• How much traction has Fair Health achieved?
• What Fair Health says:

75

Payment Methodologies Post‐Ingenix Payment Methodologies Post Ingenix

76

Payment Methodologies Post‐Ingenix y g g

• “Though the [New York Attorney General” settlement

i d [i ] t d it th [F i H lth] required [insurers] to underwrite the new [Fair Health] database with $95 million, it did not obligate them to use it. So by the time the database was finally up and running last year, the same companies, across the country, were rapidly shifting to another calculation method, based on Medicare rates, that usually reduces reimbursement substantially.” rates, that usually reduces reimbursement substantially.

New York Times, Apr. 23, 2012

77

Payment Methodologies Post‐Ingenix Payment Methodologies Post Ingenix

78

Payment Methodologies Post‐Ingenix Payment Methodologies Post Ingenix

• Instead of UCR methdologies (either Ingenix or later Fair Health), trend is

toward out‐of‐network reimbursement based on a set fee schedule (either toward out of network reimbursement based on a set fee schedule (either Medicare or a proprietary fee schedule)

79

Payment Methodologies Post‐Ingenix y g g

• Percent of Medicare reimbursement formulas produce lower fees than

UCR UCR

• Insurers responding to NY investigation (included Aetna and United) said

that OON reimbursements using percent of Medicare range from 80% to 400% with 110% to 150% being most common range 400% with 110% to 150% being most common range

• Example:

80

Payment Methodologies Post‐Ingenix y g g

• Important issue will be what the patient’s plan document say?
• This will determine the payment obligation to a provider who
• This will determine the payment obligation to a provider who

claims under an assignment of benefits

• Even if plan administrator implements a percent‐of‐Medicare

methodology plan will have to use Fair Health or other methodology, plan will have to use Fair Health or other charge‐based methodology where plan language requires it.

81

Payment Methodologies Post‐Ingenix y g g

82

Payment Methodologies Post‐Ingenix y g g

83

Out‐of‐network reimbursement take‐aways y

• Payors will increasingly set reimbursement rates at percent of

Medicare levels

• The member’s plan (provider steps into the member’s shoes)

may provide for more generous reimbursement methodology

• But member benefit plans will increasingly reference fee

p g y schedule rates rather than UCR

• Pre‐authorization of services will serve as evidence of payor

approval ‐ document it and develop procedures for advance payor approval in all out‐of‐network cases

84

Key ERISA Litigation Trends Key ERISA Litigation Trends

• Class Action Based on Recoupment Practices
• Special Attorney‐Client Privilege Issues in

ERISA Setting

• Developing Law on Equitable Relief Under

Developing Law on Equitable Relief Under ERISA

Key ERISA Decisions: Class Actions Based on Recoupment Practices Based on Recoupment Practices

• Provider and provider organizations have brought putative

class actions based on alleged recoupment practices class actions based on alleged recoupment practices

• Allege that organizations seek to recoup previously paid benefits that

post claims audits determine were non‐covered, excessive, fraudulent, unsupported by pertinent documentation, or the result of improper pp y p , p p billing practices

• Allege that if benefit not returned organization deducts or offsets the

amount from future unrelated claims

• Allege recoupment practices violate RICO and ERISA
• Decisions allegedly constitute “adverse benefit determination” under

ERISA without “full and fair review” (disclosure of plan terms, reason for denial, documentation supporting decision)

• Alleged breach of fiduciary duties under ERISA

86

ERISA Recoupment Class Actions: Association of N.J. Chiropractors, et

l A t I N 09 3761 D N J

• al. v. Aetna Inc., No. 09‐3761, D.N.J.
• Chiropractic associations and individual chiropractors filed putative class

action against Aetna in July 2010

• Allege that Aetna’s SIU would recoup overpayments identified in “Post

Payment Audits,” in violation of RICO and ERISA, the latter because they allegedly constitute “adverse benefit determinations” made without complying with ERISA p y g

• Court dismissed RICO claims (June 20, 2011)
• Court denied motion to dismiss ERISA claims, noting that “Aetna has raised

questions as to the viability of Plaintiffs’ ERISA claims,” but “that a more complete factual picture . . . is necessary to . . . resolve the issue” p p y

• Aetna filed counterclaims for fraud, negligent misrepresentation, and

unjust enrichment. Plaintiffs moved to dismiss. Court denied motion to dismiss on May 8 2012 dismiss on May 8, 2012.

• Case stayed on May 23, 2012 pending outcome of appeal in Tri3

Enterprises, LLC v. Aetna, Inc., et al., (D.N.J. No. 11‐cv‐3921)

87

ERISA Recoupment Class Actions: Pennsylvania Chiropractic Ass’n., et

l Bl C Bl Shi ld A ’ N 09C5619 N D Ill

• al. v. Blue Cross Blue Shield Ass’n., No. 09C5619, N.D. Ill.
• Plaintiffs chiropractic physician associations and individual chiropractors filed

putative class action on Sept. 10, 2009 against various Blue Cross and Blue Shield entities alleging recoupment practices violate RICO and ERISA entities alleging recoupment practices violate RICO and ERISA

• Defendants filed three motions to dismiss, which were granted as to the RICO

claims but denied as to the ERISA claims

• As to RICO clams, the Court held plaintiffs failed to plead predicate acts of racketeering

and proximate cause and proximate cause

• Defendants moved to dismiss ERISA claims on various grounds, including that Blue

entities were not proper ERISA defendants, failure to identify plan or participants at issue, and failure to exhaust. Court denied motions to dismiss the ERISA claims

• Summary judgment granted in favor of defendants on subscriber claims by order dated

January 23, 2012

• Plaintiffs’ motions to certify provider classes and motion to certify the Florida discrimination

class denied by order entered October 12, 2012

• Order denying defendants’ motion for summary judgment and granting in part and denying

in part motion for judgment on the pleadings entered October 12 2012 in part motion for judgment on the pleadings entered October 12, 2012

• Bench trial set for December 2, 2013

88

ERISA Recoupment Class Actions: Premier Health Ctr., et al. v. United

H lth G I N 11 0425 D N J Health Grp., Inc., No. 11‐0425, D.N.J.

• Plaintiffs chiropractors, chiropractic health care facilities, and chiropractic

associations filed First Amended Complaint on April 22, 2011 against UnitedHealth entities OptumHealth Health Net of Northeast and Health UnitedHealth entities, OptumHealth, Health Net of Northeast and Health Net of New York

• Recoupment Practices: Plaintiffs allege that recoupment practices

constitute adverse benefit determinations and allegedly violate ERISA, and that fiduciary duties under ERISA were breached that fiduciary duties under ERISA were breached

• Utilization Review: Plaintiffs allege OptumHealth’s pre‐authorization and

provider tiering practices violate ERISA as “adverse benefit determinations” without “full and fair review” and because pre‐ authorizations are allegedly not permitted under plan documents g y p p

• UnitedHealth and Health Net filed motions to dismiss. On 3/30/12 the

court denied United’s motion to dismiss, and granted Health Net’s motion to dismiss as to all claims pertaining to Health Net of the Northeast, and as to one Count against Health Net or New York f l f d

• Motion for class certification pending
• United’s motion for summary judgment against named representatives of

purposed “ERISA Chiropractor Class” pending

89

Key ERISA Decisions: Attorney‐Client Privilege Under ERISA Under ERISA

Stephan v Unum Life Ins. Co., 697 F.3d 917 (9th Cir. 2012)

• Participant in a long‐term disability plan insured by Unum

rendered permanently disabled in bike accident. Unum excluded annual bonus in calculation of pre‐disability earnings

• Ninth Circuit held that internal memos from Unum’s in‐house

Ninth Circuit held that internal memos from Unum s in house counsel to claims analyst regarding whether to include annual bonus was discoverable under the “Fiduciary Exception” to AC Privilege Privilege

• Fiduciary exception provides that entity acting as an ERISA fiduciary is

disabled from asserting attorney‐client privilege against plan beneficiaries on matters of plan administration p

• Ninth Circuit held that fiduciary exception applies to insurance

companies serving in the role of ERISA fiduciary

90

Key ERISA Decisions: Attorney‐Client Privilege Under ERISA Under ERISA

Stephan v Unum Life Ins. Co., 697 F.3d 917 (9th Cir. 2012)

• The AC Privilege applies only after the insurer and beneficiary
• The AC Privilege applies only after the insurer and beneficiary

are sufficiently “adverse”

• It is not until after the final administrative appeal that the

i t t f th l fid i d b fi i b interests of the plan fiduciary and beneficiary become sufficiently adverse to prevent application of the fiduciary exception

M i d i f b fi d d h l

• Memos at issue were advice on amount of benefits owed under the plan,

before Unum made final determination, and constituted advice on plan administration given before interests of Stephen and Unum became adverse

• Receipt of a demand letter from the beneficiary’s attorney did not make

the situation sufficiently adverse to protect the insurer’s AC privilege

91

Key ERISA Decisions: Attorney‐Client Privilege Under ERISA Under ERISA

• A conflict exists between the 3rd and 9th Circuits
• Wachtel v Health Net Inc 482 F 3d 225 (3d Cir 2007)
• Wachtel v. Health Net, Inc., 482 F.3d 225 (3d Cir. 2007)
• ERISA beneficiaries filed suit under 502 of ERISA alleging that Health Net of New

Jersey relied on antiquated data and improper methods to define UCR charges, allegedly violating New Jersey law and duties as statutory fiduciaries

• Third Circuit held that fiduciary exception did not apply to communications

between Health Net and its attorneys

• Health Net – and not the plan beneficiaries – was the client for

whom the legal advice was given. Four factors support this position: whom the legal advice was given. Four factors support this position:

• Unity of ownership and management
• Conflicting interest regarding profits
• Conflicting fiduciary obligations

f l i h fid i ’ f d

• Payment of counsel with fiduciary’s own funds
• The fiduciary’s duty of disclosure did not require that Health Net

reveal the advice it obtained from retained counsel

92

Key ERISA Decisions: Attorney‐Client Privilege Under ERISA Under ERISA

• Sensitize in‐house counsel to lack of privilege
• Does using outside counsel make a difference?
• Is this good “policy” under the law?

Is this good policy under the law?

• Will it discourage seeking counsel opinion?
• Will it have a chilling effect on opinions given by
• Will it have a chilling effect on opinions given by

counsel?

93

Key ERISA Decisions: Equitable Relief

Cigna Corp. v. Amara, 131 S.Ct. 1866 (2011)

• Pension plan participants brought putative class action against Cigna based on

conversion from traditional defined benefit plan to cash balance plan alleging Cigna failed to give them proper notice of changes to their benefits.

• District Court found disclosures violated obligations under ERISA and caused

participants “likely harm ” It reformed the new plan and ordered Cigna to pay participants likely harm. It reformed the new plan and ordered Cigna to pay benefits under ERISA § 502(a)(1)(B).

• Supreme Court held that § 502(a)(1)(B) did not give District Court authority to

reform plan, but relief is authorized by § 502(a)(3) as appropriate equitable relief. p , y ( )( ) pp p q

• To obtain equitable relief of surcharge, Supreme Court held that plan participant

must show that violation caused injury, but need only show actual harm and causation, not detrimental reliance.

• District court on remand found that both reformation and surcharge were

appropriate equitable remedies that allowed it to provide plaintiffs with the same form of relief that was previously ordered.

94

Key ERISA Decisions: Equitable Relief

U.S. Airways, Inc. v. McCutchen, 133 S.Ct. 1537 (2013)

• McCutchen injured in auto accident and Plan paid $66,866 in medical expenses.
• McCutchen sued other driver settled with driver for $10 000 and secured
• McCutchen sued other driver, settled with driver for $10,000, and secured

payment of $100,000 from McCutchen’s own insurer, for total of $110,000. After deduction of attorney’s fees and costs, McCutchen received $66,000.

• Plan sued McCutchen under ERISA § 502(a)(3) seeking reimbursement of full

§ ( )( ) g $66,866 it paid in medical bills. McCutchen claimed that equitable doctrines of double recovery and common‐fund rule limited Plan’s recovery.

• Supreme Court held that in a § 502(a)(3) based on an equitable lean by agreement

the Plan terms govern. Unjust enrichment or other equitable principles cannot

• verride the contract. Equitable defenses may, however, still aid in properly

construing a contract.

• Plan was silent regarding allocation of attorney’s fees and the common fund
• Plan was silent regarding allocation of attorney s fees, and the common‐fund

doctrine provided the appropriate default.

95

Suits Challenging the Blues Structure and Blues Plans’ Exclusive Service Areas

96

Background and Concept Background and Concept

• Blue Cross and Blue Shield plans historically competed with one

p y p another

• Blue Cross Blue Shield Association (BCBSA) formed in the 1980s

BCBSA d li h “Bl C ” d “Bl Shi ld”

• BCBSA owns and licenses the “Blue Cross” and “Blue Shield”

trademarks and service marks

• A given entity (can be non‐profit or for profit) holds the “Blue

g y ( p p ) Cross” or “Blue Shield” mark in a given geographic region

• In the past, some states had more than one Blue plan. Now Blue

plans within a state have consolidated to one plan per state plans within a state have consolidated to one plan per state.

97

Nature of Litigation Nature of Litigation

• Numerous lawsuits filed on behalf of putative classes, some

provider and some subscriber.

• Principal claims are antitrust, Sherman Act, § 1 claims (“every

contract, combination . . . or conspiracy in restraint of trade or , p y commerce” shall be illegal).

• Suits alleged that Blues plans, through the BCBSA, entered in an

agreement to divide geographic markets and give plans a agreement to divide geographic markets and give plans a monopoly in a given geography.

• Division of geography via the BCBSA licensing procedure alleged

to be “a naked territorial restrain[t] on competition in the to be a naked territorial restrain[t] on competition in the market for health insurance.”

– Conway v. Blue Cross Blue Shield of Ala., No. 2:12‐cv‐02532 (N.D. Ala.) consolidated in In re: Blue Cross Blue Shield Antitrust Litig., MDL No. 2406 (N.D. Ala.)

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Blues’ Relative Market Power Blues Relative Market Power

• Allegations regarding the Blues plans’ market share are key
• Allegations regarding the Blues plans market share are key
• aspect. Market share of relevant Blue plans alleged to be:

– Over 73.8% of North Carolina residents who subscribe to full‐ service commercial health insurance service commercial health insurance

• Cerven v. Blue Cross Blue Shield of N.C., No. 5:12‐cv‐17, consolidated in In re: Blue

Cross Blue Shield Antitrust Litig., MDL No. 2406 (N.D. Ala.)

– 68% of Tennessee health insurance market 68% of Tennessee health insurance market – 96% of subscribers of full‐service commercial health insurance plans in Alabama small group market

• See Conway Compl.

See Conway Compl.

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How Plaintiffs Claim the Conspiracy Works How Plaintiffs Claim the Conspiracy Works

• The conspiracy, according to plaintiffs, causes 38 Blues plans

p y, g p , p from crossing state lines and competing with one another

• Effect of the conspiracy is alleged to be inflated premiums to

subscribers and depressed payments to providers subscribers and depressed payments to providers

• Examples of allegations from Conway complaint:

– “Defendants have conspired to divide the healthcare market in the United States into geographically defined regions in order to allow each BCBS plan an exclusive, competition‐free slice of the healthcare market.” (¶ 1.) – “This illegal restraint is implemented through the Blue Cross and Blue Shi ld li h h li h d i i h Shield license agreements that each licensee has entered into with Defendant BCBSA.” (¶ 65.)

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What is the status? What is the status?

• On 12/26/2012, the Judicial Panel on Multidistrict Litigation issued

a consolidation order transferring the cases were transferred into a federal court in Alabama for consolidated pre‐trial proceedings

• More cases have been subsequently transferred

More cases have been subsequently transferred

• Litigation has ensued over who would serve as lead counsel for the

Plaintiffs and whether separate consolidated complaints (subscriber d id t k ) ld b ll d i t d i l l i t and provider tracks) would be allowed or instead a single complaint would be filed on behalf of Plaintiffs

• Defendants will press the argument that their license agreement is

legal and competitive (by promoting a national brand that allows Blues plans to compete with national payors)

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Payor Actions Challenging Provider W i f C i C d Waivers of Co‐insurance, Co‐pays and Deductibles

Co‐insurance/Co‐pay/Deductible Waiver Liti ti Litigation

• Payor Themes
• Cherry Pick (target and siphon) high‐value patients from in‐

network, full service hospitals or providers and refer to out‐of‐ network facilities in which referring physician has financial network facilities in which referring physician has financial interest

• Out‐of‐network facility discounts or waivers of co‐payments and
• ther out of pocket costs
• ther out‐of‐pocket costs
• Results in higher plan costs

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Co‐insurance/Co‐pay/Deductible Waiver Liti ti Litigation

• Claims

d

• Fraud
• Money had and received
• Unjust Enrichment
• Unjust Enrichment
• Injunctive Relief
• Declaratory Judgment
• Declaratory Judgment
• ERISA § 502(a)(3) relief
• constructive trust
• injunction
• return of plan assets

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Co‐insurance/Co‐pay/Deductible Waiver Liti ti Litigation

• Aetna Life Insurance Co. v. Bay Area Surgical Management LLC, No. 112‐CV‐217943, Santa

Clara Superior Court (filed Feb. 2, 2012) p ( )

• Defendants are 7 non‐par surgery centers and related individuals
• Allegations:
• Surgery centers illegally induced Aetna’s in‐network physicians (who are also investors in

Surgery centers illegally induced Aetna s in network physicians (who are also investors in

• ut‐of network surgery centers) to refer patients to out‐of‐network centers
• Physicians’ ownership interest provides incentive or referral fees for out‐of‐network

referrals

• Surgery center management cherry picks patients for referral based on high insurance

coverage

• Surgery center seeks non‐par reimbursement from insurer at rates that are much higher

than contracted facility rates than contracted facility rates

• Surgery center waives or reduces copayment so that patient does not pay more than an

in‐network copayment

• Physicians fail to adequately disclose to members their ownership/financial

interest/incentive to refer

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Co‐insurance/Co‐pay/Deductible Waiver Litigation:

if i l Aetna Life Insurance Co. v. Bay Area Surgical Management LLC

• Examples from complaint:
• Physician received an annual bonus of $980 000
• Physician received an annual bonus of $980,000
• Physicians promised 805% annualized return on investment
• Surgery center charge for “correction of bunion”: $66,100
• Aetna paid $23 million for 1900 procedures that should have cost only $3

illi 771% i million – a 771% increase

• Payments from 513% to 1135% higher (percentage varied for each center)

than Aetna paid its in‐network providers in same geographic area for same procedures

• Waiver of Copayment:
• $66,100 for “correction of bunion” procedure represented as reasonable charge
• Surgery center never collects $10,576 (20% of $52,880) (total allowed amount) from member as

coinsurance or other compensation p

• Surgery center submits claim for $66,100 with intent that Aetna would remit 80% of $66,100
• Aetna pays $52,880 based on the misrepresentation
• Aetna should have been charged or paid more than $42,304 ($52,880 (allowed amount) x Aetna’s

80% responsibility)

• Aetna damaged $10 576: ($52 880 (amount paid) less $42 304 (most should have paid))
• Aetna damaged $10,576: ($52,880 (amount paid) less $42,304 (most should have paid))

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Co‐insurance/Co‐pay/Deductible Waiver Litigation:

A t Lif I C B A S i l M t LLC Aetna Life Insurance Co. v. Bay Area Surgical Management LLC

• Relief Sought:
• Aetna asserts causes of action for:
• Unfair business practices/B&P § 17200 based on, inter alia (1) offering

compensation for referral of patients, (2) referring patients to organization in which physicians have beneficial interest without disclosing interest in writing, (3) submitting false claim, and (4) corporate practice of medicine

• Intentional interference with contractual relations with its members and with

its in‐network participating providers

• Fraud
• Declaratory judgment
• Unjust enrichment
• Aetna seeks
• $23 million in damages
• Disgorgement of profits
• Attorneys’ fees

Attorneys fees

• Injunction, and
• Declaration that "fee‐forgiving" practices are illegal

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Co‐insurance/Co‐pay/Deductible Waiver Litigation:

if i l Aetna Life Insurance Co. v. Bay Area Surgical Management LLC

• Court overrules Demurrer & Motion to Strike (September 28,

2012): )

• Aetna adequately pleads a UCL violation based on illegal referrals (B&P Code 650)

because alleges that remuneration is based on value or volume of referrals, not proportional to investment or ownership

• UCL is also supported by alleged fraudulent waiver of copayments (distinguishing a 1981
• UCL is also supported by alleged fraudulent waiver of copayments (distinguishing a 1981

AG Opinion and the Duz‐MorCase)

• Failure to disclose waiver of copayment to insurer can be fraudulent
• Aetna has standing to allege illegal corporate practice of medicine based on surgicenters

“cherrypicking” the patients for referral

• Aetna adequately pleads a cause of action for unjust enrichment
• Demurrer to claim for “interference with contract” sustained with leave to amend to

clarify how member’s or provider’s contracts were affected clarify how member s or provider s contracts were affected

• First Amended Complaint filed October 12, 2012
• Defendants’ motion to dismiss and motion to strike (filed

F b 19 2013) di February 19, 2013) pending

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Co‐insurance/Co‐pay/Deductible Waiver Liti ti Litigation

• Aetna v. Bay Area Surgical Management LLC, N.D.

Cal No 5:12 CV 05829 Cal., No 5:12‐CV‐05829

• Aetna filed first amended complaint on October 12, 2012
• Plaintiffs removed state court lawsuit to N.D. Cal on November
• Plaintiffs removed state court lawsuit to N.D. Cal on November

14, 2012 on grounds that the case involved Medicare claims and claims for benefits under ERISA

• Amended Order Granting Aetna’s Motion to Remand entered on
• Amended Order Granting Aetna s Motion to Remand entered on

February 25, 2013

• Removal was untimely

E if ti l f d l ti id d b i f l

• Even if timely, no federal question provided a basis for removal
• Aetna’s state law claims did not arise under the Medicare Act
• Aetna’s state law claims were not preempted by ERISA

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Co‐insurance/Co‐pay/Deductible Waiver Liti ti Litigation

• Aetna v. Humble Surgical Hospital, S.D. Tex., No. 4:12‐cv‐

01206 01206

• Complaint filed April 18, 2012 alleges
• Hospital in submitting claims for excessive charges did not disclose waivers,

th i d t i d ti t t h it l i l di reassurances or other promises made to induce patients to use hospital, including reassurance that they would not pay more in coinsurance, deductibles or other patient‐responsibility charges than they would at an in‐network facility

• Hospital allegedly misrepresents charges because claim submitted to Aetna was not

a claim for amount patient agreed to pay, but for an inflated amount

• Hospital’s Motion to Compel Arbitration and Motion to Dismiss

denied by Order dated July 9, 2012. Hospital appealed

• Fifth Circuit affirmed order denying motion to compel

arbitration on April 15, 2013

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Co‐insurance/Co‐pay/Deductible Waiver Liti ti Litigation

• Similar suits filed by Aetna against nine New
• Similar suits filed by Aetna against nine New

Jersey and two New York doctors, along with Long Island based surgery center Long Island‐based surgery center

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Co‐insurance/Co‐pay/Deductible Waiver Liti ti Litigation

• Connecticut General Life Insurance Co. v. Bay Area

l l Surgical Management, LLC, N.D. Cal., No. 5:13‐cv‐ 00156‐HRL

Fil d J 11 2013 fil d b CIGNA i t B A

• Filed on January 11, 2013 filed by CIGNA against Bay Area

Surgical Management defendants sued in Aetna Life Insurance

• Co. v. Bay Area Surgical Management LLC
• Allege common law fraud, violations of ERISA and Section 17200
• CIGNA seeks to recover tens of millions of dollars as a result of

alleged scheme to defraud by overbilling for services allegedly g y g g y provided to participants in CIGNA health plans

• Defendants’ motion to dismiss is pending

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Co‐insurance/Co‐pay/Deductible Waiver Liti ti Litigation

• North Cypress Medical Center Operating Co., Ltd.

l h

• v. CIGNA Healthcare, S.D. Tex, No. 4:09‐CV‐2556
• North Cypress filed complaint on August 11, 2009 for

alleged $20 million in UCR denials under ERISA alleged $20 million in UCR denials under ERISA

• CIGNA counterclaimed, alleging an ongoing scheme to

defraud CIGNA through a practice known as fee forgiving g p g g

• Final Judgment entered December 12, 2012. Court

disposed of all claims of both parties through this order and prior orders

• North Cypress filed Notice of Appeal to Fifth Circuit on

December 14 2012 December 14, 2012

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Co‐insurance/Co‐pay/Deductible Waiver Litigation:

United Healthcare Services, Inc. v. Bay Area Surgical Management, LLC, No. 112CV226686, Santa Clara Superior Court (filed June 18, 2012)

• Defendants include 6 out‐of‐network surgery centers and related

individuals

• Causes of action for Fraud and Unfair Business Practices/B&P § 17200
• Allegations:
• Defendants submitted inflated and fraudulent bills that were greater than the amount actually
• Defendants submitted inflated and fraudulent bills that were greater than the amount actually

charged to United members

• Defendants failed to disclose their routine waiver of coinsurance, copayment and other amounts of

member responsibility

• Defendants incentivized physicians to refer patients with favorable out‐of‐network benefits to the

facility defendants by providing discounted ownership shares and above‐market rates of return on

• wnership
• Defendants violated the federal Stark law, federal anti‐kickback law, and federal prohibitions on

waiver of copayment and deductible amounts for claims involving Medicare patients

• Defendants fraudulently induced United to pay approx. $39,045,539 based on the alleged

misrepresentations and unlawful conduct

• Individual Defendants’ motion to dismiss, and BASM and Surgery

Centers’ motion to dismiss, are both pending Centers motion to dismiss, are both pending

• Defendants’ motion to strike pending

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Availability of Class Arbitration in Managed C Di t Care Disputes

• On June 10, 2013, the Supreme Court decided Oxford Health

Pl LLC S tt N 12 135 Plans LLC v. Sutter, No. 12‐135.

• Sutter, a pediatrician, had filed a putative class action under

his managed care contract and various state laws in New g Jersey state court.

• Oxford successfully moved to compel arbitration.
• The arbitrator determined that the managed care agreement

authorized class arbitration.

• The district court denied a motion to vacate the decision

The district court denied a motion to vacate the decision. Third Circuit affirmed. Supreme Court affirmed 9‐0.

Availability of Class Arbitration in Managed C Di t Care Disputes

Basis for the Oxford Health Plans LLC v. Sutter decision:

– Supreme Court has already established (Stolt‐Nielsen S.A. v. AnimalFeeds Sup e e Cou t as a eady estab s ed (Sto t e se S a eeds Int’l Corp., 559 U.S. 662 (2010)) that “a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.”). – In Oxford Health, the parties agreed that the arbitrator would determine In Oxford Health, the parties agreed that the arbitrator would determine whether the managed care contract permitted class arbitration. – Given that the arbitrator decided the issue, and neither party had claimed that the class arbitration question was an issue of “arbitrability” for the federal court, the Supreme Court’s role in reviewing the arbitrator was federal court, the Supreme Court s role in reviewing the arbitrator was very limited. – The motion to vacate under FAA § 10(a)(4) could be granted “only when the arbitrator strayed from his delegated task of interpreting a contract, not where he performed that task poorly.” not where he performed that task poorly. – Important decision for how to litigate class arbitration entitlement in a managed care dispute.

Questions & Answers Questions & Answers

James W. Boswell Partner KING & SPALDING LLP 1180 Peachtree Street, Atlanta, GA 30309 404 572 3534 | Direct Fax: 404 572 5100 jboswell@kslaw com | www kslaw com jboswell@kslaw.com | www.kslaw.com Andrew J. Hefty Partner CROWELL & MORING LLP 275 Battery Street, 23rd Floor, San Francisco, CA 94111 (415) 365 7261 | Fax (415) 986 2827 (415) 365‐7261 | Fax (415) 986‐2827 ahefty@crowell.com | www.crowell.com

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