Cigna Prevails in Texas Hospital Lawsuit Over Underpaid Claims

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Carmen Castro-Pagan

Cigna Healthcare defeated a lawsuit by a Houston hospital accusing it of underpaying hundreds of medical benefit claims.

Cigna didn’t abuse its discretion when it reduced benefit payments to North Cypress Medical Center Operating Co. Ltd after it learned that the hospital engaged in fee-forgiving—a practice where out-of-network providers charge patients less than what they owe under their health insurance plans, a federal judge in Texas held Aug. 7.

Multiple lawsuits challenging the billing and payment practices between out-of-network providers and health insurers have been filed in the past decade, when insurers started reducing or withholding payments to providers that engaged in fee-forgiving. Insurers such as Cigna, Aetna, and UnitedHealthcare allege this practice is fraudulent.

The ruling, which came after an eight-day bench trial, is a significant victory for Cigna in a long-running lawsuit by North Cypress, which sought to hold the insurer liable for at least $50 million in unpaid claims.

In 2016, Judge Keith P. Ellison held that Cigna violated federal benefits law by denying full payment of benefit claims.

Since then, the U.S. Court of Appeals for the Fifth Circuit issued a number of opinions in favor of insurers, including one where it reversed a $16.4 million judgment against Cigna in a case in which another small Texas-based hospital accused it of underpaying medical claims. Last week, the Fifth Circuit affirmed a ruling against the hospital in its lawsuit accusing Aetna Life Insurance Co. of underpaying medical claims in violation of the Employee Retirement Income Security Act and Texas law.

After the parties Cigna and North Cypress engaged in full discovery, the claims at issue were limited to the 575 benefit claims for which the hospital exhausted its administrative remedies. Cigna argued at trial that in these 575 claims, it didn’t apply its fee-forgiving protocol to reduce payments to 395 of them because they were for nonemergency services.

Cigna’s interpretation of its plans to require an out-of-network provider to collect the full portion of coinsurance from a patient was reasonable, Ellison said.

Ellison, who sits in the U.S. District Court for the Southern District of Texas, pointed out that Cigna had substantial evidence to support its determination that North Cypress engaged in fee-forgiving. Cigna had sent surveys to patients who had received treatment at North Cypress and it discovered that the hospital was discounting or forgiving out-of-network coinsurance, Ellison said.

Kelly Sutter & Kendrick PC represents North Cypress. Kirkland & Ellis LLP and Alan W. Harris represent Cigna.

The case is North Cypress Med. Ctr. Operating Co. v. Cigna Healthcare, 2018 BL 281112, S.D. Tex., No. 4:09-cv-02556, findings of fact and conclusions of law in favor of defendant 8/7/18.

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