Aetna, Optum to pay $8.4 million to settle ‘dummy codes’ lawsuit

CVS subsidiary Aetna and UnitedHealth Group company Optum have reached a settlement in which they will pay roughly $8.4 million to settle a lengthy legal battle over “dummy codes.”

These codes were used to hide administrative expenses in patients’ medical charges, which resulted in raising their out-of-pocket costs, according to the original complaint filed in 2015 by retired Aetna employee Sandra Peters.

That lawsuit claimed that Aetna and Optum’s care delivery unit, Optum Health, failed to uphold fiduciary duties under the Employee Retirement Income Security Act (ERISA), which has oversight of private sector employee benefit plans.

WHY THIS MATTERS

The case was settled September 3 in the Western District Court of North Carolina. The court determined that Aetna would pay $4.6 million as well as roughly $3.6 million in legal fees, while Optum is required to pay $200,000.

Peters’ complaint has since grown to become a class action lawsuit covering more than 250,000 members. She filed the complaint when she saw an unexpected spike in her chiropractic and physical therapy costs. Optum was named in the lawsuit because Peters alleged that Aetna colluded with Optum Health as a subcontractor to help cover administrative costs.

This claim was backed up by emails between Aetna and Optum Health executives, showing they had agreed to add an extra service code to patients’ bills. Aetna also admitted to state regulators in North Carolina that it had directed Optum Health to submit the codes so they could be reimbursed for services.

A district court ruled in favor of Aetna and Optum Health in 2019, swayed by Aetna’s arguments that total costs were lower than they would have been if they hadn’t contracted with Optum. But two years later that decision was overturned in the 4th Circuit Court of Appeals, and in 2022 the Supreme Court declined to hear the case.

THE LARGER TREND

CVS said earlier this year that Aetna was struggling and will exit the Affordable Care Act individual markets in 2026. Aetna has exited the ACA market before, in 2018, when it joined other insurers in leaving or downsizing its footprint, as premiums rose and insurers lost money.

In 2021, Aetna re-entered the market, with former CEO Karen Lynch saying at the time that the market had stabilized and resolved earlier "structural issues." Yet Aetna has struggled since its reintroduction into the ACA exchange, and posted an adjusted operating income loss of $924 million in 2024. 

Optum is also struggling, with Q2 financial results showing the company was $6.6 billion below expectations in earnings. Optum CEO Patrick Conway attributed this to a number of factors, including an accelerated medical cost trend, lower service volumes and an underestimation of new members’ risk status.