MEDICARE HMOs: Five Insurers Face ‘Restraint of Trade’ Charges
Several of the nation's largest HMOs are facing a major legal challenge, as two law firms have filed suit in California Superior Court alleging that the insurers "conspired to limit services to Medicare beneficiaries" in an effort to force Congress to increase reimbursement rates, the Wall Street Journal reports. This suit differs from other HMO lawsuits since it does not allege breach of contract or conflict of interest. Instead, it charges the HMOs with restraint of trade, claiming that the companies denied potential enrollees access to the plan when they agreed to "redline" certain regions in California, including San Mateo and Santa Clara counties. Seeking class action status, the suit indicates that 14,000 elderly and disabled Medicare beneficiaries were affected (Gentry/Choi, 3/7). Defendants named in the case are Aetna, Cigna, Lifeguard, Prudential Healthcare Group and United Health Care. Yvonne Green, a San Mateo County resident, is named as the plaintiff.
Bait and Switch?
After subscribing to an Aetna U.S. Healthcare plan for services not paid under the regular Medicare program, Green argued that she was forced to subscribe to a more expensive Healthnet plan after Aetna pulled out of the less lucrative Medicare HMO market. The suit contends that the HMOs continued to "aggressively advertise to seniors and sign up increasing numbers for new policies," at the same time they were telling Congress that they were "being priced out of the Medicare market." Plantiff's attorney Bruce Simon said, "These Medicare HMO providers chose their own selfish concerns over those of seniors by pulling out. That was in response to the government deciding they were being reimbursed too much." Responding to the suit, Walter Zelman, president of the California Association of Health Plans, said that the HMOs pulled out only after Congress made it financially impossible to stay in the business. He said, "Medicare is a potentially huge business for HMOs. In some ways, it's the last great untapped marketplace. No HMO in Medicare wants to leave" (Enge, San Jose Mercury News, 3/7). Officials from the insurers declined to comment (Wall Street Journal, 3/7).