HUMANA: Liable Under RICO, Says Supreme Court
The Supreme Court ruled unanimously yesterday that health insurers can be sued by their customers under the federal Racketeering Influenced and Corrupt Organizations Act (RICO), clearing the way for possible triple damages in a class-action suit against Humana Inc. and giving consumers and regulators a potent new weapon to combat systemic fraud. The Los Angeles Times reports that "[i]ndividuals who clash with their insurance company or health care provider are not likely to benefit from the ruling," but it will likely "spur more class-action suits involving thousands of poicyholders" (Savage, 1/21).
The decade-old class-action lawsuit representing 84,000 Humana enrollees charged the insurer with negotiating secret discounts with an affiliated hospital, and failing to pass the savings on to consumers. A federal judge said that RICO could not be applied to the case, the 9th U.S. Circuit Court of Appeals overturned that decision and the Supreme Court sided with the appellate court yesterday. Although Humana's lawyers argued that the McCarran-Ferguson Act precluded the federal government from superseding state law on insurance matters, Justice Ruth Bader Ginsburg, writing for the court, said "suing under RICO would not impair Nevada's own insurance laws but appeared to complement the remedies available under state law." She cautioned that the ruling does not represent "a green light for federal regulation whenever the federal law does not collide head on with state regulation" (Associated Press, 1/20).
Reactions to the ruling were mixed, with consumer advocates and insurance regulators supportive of a decision that "is going to make people who are thinking of defrauding consumers think twice," and insurance company representatives -- including those outside the health care sector -- unsure of what the decision will mean for the industry. Franklin Burt, who filed an amicus curae brief on behalf of non-health care insurers, called the ruling "very bad for the insurance industry," and predicted it would mean more large class-action suits and "higher rates for all of us." But Nancy Perkins, who filed an amicus brief for health care insurers, said the new legal standard was "not the best for the insurance industry, but it's reasonable" (Hilzenrath/Biskupic, Washington Post, 1/21). Humana, in a release yesterday, said that the company "has not been found guilty of any wrongdoing," and "continues to believe that its business conduct has been both legal and ethical" (1/20).