MANAGED CARE: Class-Action Lawsuits Filed Against 5 HMOs
In a move that experts say could drive up the prices of health care premiums, a group of lawyers filed class-action lawsuits in federal court Monday against five of the nation's largest HMOs, alleging systematic violations of federal anti-racketeering laws. The attorneys say that the suits, which charge HMOs with fraudulently denying and limiting medical services to patients, are intended to force managed care companies to base decisions on medical rather than financial criteria (Rubin/Weinstein, Los Angeles Times, 11/24). Officials of the targeted companies, however, said the suits "approach extortion" and are merely intended to enrich the lawyers (Ullmann, USA Today, 11/24). The lawsuits -- filed in U.S. District Court in Hattiesburg, MS -- against Cigna, Foundation Health Systems, Humana, Pacificare Health Systems and Prudential Health Care -- accuse the insurers of the following:
- Providing financial incentives for physicians and claims reviewers to limit treatment;
- Imposing "gag" clauses and conditions that penalize doctors for discussing certain treatment options with patients
- Making decisions of medical necessity based on financial considerations; and
- Limiting patients' access to specialists (Scruggs, Millette, Bozeman & Dent release, 11/24).
Suit Could Take Years
The attorneys, led by Richard Scruggs, one of the key players in the multi-billion-dollar lawsuits filed against tobacco companies by the states, are seeking damages and an injunction against the HMOs that would prevent them from engaging in "fraudulent and extortionate policies and practices" (Los Angeles Times, 11/24). Scruggs, however, has indicated that the real purpose of the lawsuits is to depress HMOs' stock prices and force a settlement -- which could include provisions, and possibly legislation, intended to strengthen patients' rights when dealing with insurers, as well as limits on annual damages against the industry as a result of such suits (USA Today, 11/24). Legal experts, though, question whether the lawsuits will even pass preliminary legal challenges and win class certification: "The ability to prove that common issues predominate in a case like this is very difficult," American Association of Health Plans lawyer Jim Jorden said. Analysts on Wall Street predict that the battle will take several years to resolve. Regardless of the suits' outcome, insurance executives say that the costs of litigation will drive up the price of health care coverage for patients. Scruggs admitted that any eventual settlement would probably force HMOs to "re-evaluate their own premium structures" in favor of higher premiums, even though the lawyers are not seeking a settlement as large as those reached in the recent anti-smoking suits (Los Angeles Times, 11/24).