Horizon's Ingenix Settlement Approved, Class Members Obtain No Monetary Relief

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By Matthew Loughran  

July 14 — Horizon Blue Cross Blue Shield of New Jersey has agreed to amend its out-of-network payment procedures by discontinuing use of an allegedly faulty charging database and providing more transparency for the basis of its payment decisions to its subscribers and health care providers in a settlement approved by a federal judge in New Jersey.

The settlement, which provides no monetary damages to the class members, was approved in an unpublished decision by Judge Stanley R. Chesler on July 9 and settles claims that Horizon violated the Employee Retirement Income Security Act by using the Ingenix database to calculate out-of-network charges.

Eric D. Katz, partner at Mazie Slater Katz & Freeman LLC in Roseland, N.J., told Bloomberg BNA on July 14 that the group of objectors that he represents plans to appeal the court's decision.

“We have reviewed the opinion and believe that the district judge erred on multiple issues,” he said. “We look forward to presenting these matters to the Third Circuit.”

The final approval of the settlement comes only two weeks after the same judge granted summary judgment to CIGNA in an identical lawsuit challenging use of the same databases.

In providing final approval, the court pointed to the result in that case, Franco v. Conn. Gen. Life Ins. Co.,2014 BL 175262 (D.N.J. 6/24/14), as an example of the difficulties faced by class members in prosecuting a class action for ERISA violations based on the use of the Ingenix databases when both plan language and state insurance regulations required that the insurer use the databases.

The settlement ends a five-year litigation that involved claims from more than 2.6 million Horizon subscribers and 180,839 out-of-network health-care providers that the insurer underpaid benefits under its health insurance plans by calculating allowable payments with the assistance of the databases that artificially suppressed chargeable amounts through flawed and incomplete data and invalid geographic comparisons.

Settlement Terms

The settlement granted no money damages to the class members and only provided them with injunctive relief in their claims against Horizon.

According to the court, Horizon has agreed as part of the settlement to discontinue the use of two databases released by Ingenix Inc. as well as a proprietary medical services and supplies charge data profile known as “Top-of-Range” when calculating allowable payments to out-of-network health-care providers.

The insurer has also agreed to revise its health plan language and marketing materials and handbooks to provide a clearer statement of how it derives the allowable payment amounts to out-of-network providers.

In response to concerns expressed by objectors after the settlement had gained preliminary approval, the court found that the parties had amended the settlement agreement to remove language that canceled all assignment of rights by subscribers related to the litigation.

The court approved $2.5 million in attorneys' fees to class counsel, finding the requested amount was warranted due to the complexity of the case and the fact that it was $900,000 less than the calculated lodestar amount.

Bruce Nagel of Nagel Rice LLP in Roseland, N.J., who represented the class members in the litigation, expressed his clients' satisfaction with terms of the settlement agreement.

“We are pleased that Horizon agreed to discontinue two reimbursement methodologies and make clear in the future the basis of out of network reimbursements to all policy holders,” he told Bloomberg BNA on July 14.

Representatives from Horizon echoed Nagel's assessment of the settlement.

“We commend the court for its understanding of the complex issues in this case,” Thomas Vincz, the public relations manager for Horizon told Bloomberg BNA on July 14. “Horizon BCBSNJ is committed to extending the benefits of this settlement to our health care providers and members.”

Ingenix Databases

The lawsuit is one of many filed against a number of different insurance companies alleging that out-of-network services were underpaid because of flawed “usual, customary and reasonable” (UCR) rate data provided by Ingenix Inc.

The class members in the instant case alleged that Horizon failed to appropriately reimburse them for out-of-network services they received because it used the “flawed, corrupted and outdated Ingenix" database to determine the UCR for a service.

The Ingenix data allegedly generated artificially low UCRs, which resulted in the underpayment of out-of-network claims.

The class members alleged that insurers, including Horizon, contributed inaccurate data, and Ingenix adjusted the data to remove high-end values but not low-end outliers so as to lower the average charge for out-of-network services.

The class complaint claimed that, by using the flawed database, Horizon breached its obligation to pay out-of-network claims based on the UCR for services, and violated its statutory duties of loyalty and care.

The court had previously dismissed claims by the class members that Horizon violated its duties under ERISA by failing to disclose the flaws in the Ingenix database.

In the Franco case, the court refused to certify multiple subclasses against CIGNA for the same claims.

Finding in that case that the insurer had been required by both plan documentation and New Jersey state insurance regulations to use the Ingenix databases, the court then granted summary judgment to CIGNA and dismissed claims that it violated its fiduciary duties under ERISA by using the database to determine UCR's for out-of-network services.

In the instant case, the judge referenced the negative result for the class members in Franco as one reason why the settlement in this case was reasonable and fair.

Additionally, in the Franco case, CIGNA had already entered into an agreement with the New York Attorney General's office to discontinue use of the Ingenix databases, which now Horizon has also agreed to do under the terms of the settlement in the instant case.

The class members were represented by Nagel, Andrew Lowe O'Connor, Robert H. Solomon and Randee M. Matloff of Nagel Rice LLP in Roseland, N.J., Elliott Louis Pell of Florham Park, N.J., and Bruce Daniel Greenberg of Lite DePalma Greenberg LLC in Newark, N.J.

Horizon was represented by David Jay, Philip R. Sellinger and Michael J. Slocum of Greenberg Traurig LLP in Florham Park, N.J., and James P. Flynn of Epstein, Becker & Green PC in Newark, N.J.

The objectors were represented by Katz, David M. Freeman and David Michael Estes of Mazie Slater Katz & Freeman LLC in Roseland, N.J.

To contact the reporter on this story: Matthew Loughran in Washington at mloughran@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

Text of the opinion is at http://www.bloomberglaw.com/public/document/MCDONOUGH_v_HORIZON_BLUE_CROSS_BLUE_SHIELD_OF_NEW_JERSEY_INC_2014.

Text of the settlement agreement is at http://www.bloomberglaw.com/public/document/MCDONOUGH_v_HORIZON_BLUE_CROSS_BLUE_SHIELD_OF_NEW_JERSEY_INC_Dock.