Depending on the outcome of a lawsuit Cigna is pursuing in Los Angeles, more out-of-network providers may be able to offer patients discounts while billing health plans in full.
In May 2013, Cigna sued La Peer Surgery Center in federal district court in California, demanding restitution for alleged overbilling of self-funded group plans the company administered, under the Employee Retirement Income Security Act and California's Unfair Competition Law.
While La Peer Surgery Center was an out-of-network provider without contract with the plan, Cigna's lawyers alleged the center reduced or waived employee-member's co-pays as a way to garner the higher, out-of-network reimbursements and circumvent the health plan's goals of incentivizing members to use in-network providers reimbursed on discounted fee schedules.
The bills for La Peer Surgery Center were substantially higher than those at in-network providers -- for some services more than 2,000 percent higher -- and La Peer never disclosed that it was offering members discounts, argued Cigna's lawyers, from the firm Gordon & Rees.
La Peer, a physician-owned surgical center in Beverly Hills offering services in a range of specialities, including gastroenterology, thoracic and plastic surgery, argued that the lawsuit should be dismissed on that grounds that Cigna didn't fully use administrative remedies, failed to make sufficiently specific claims, and can't sue under both federal ERISA law and state business law, since the former typically preempts the latter.
Judge Christina Snyder agreed with Cigna that as an ERISA fiduciary (or an administrator of an ERISA-covered group plan) it generally can sue. Snyder ended up dismissing the case tentatively, though, because Cigna "has not sufficiently alleged that it is in fact a fiduciary of the ERISA plans" -- in other words, because the employers have not been named in the lawsuit.
"Although CIGNA's prosecution of this action on behalf of undisclosed ERISA plans is not precisely analogous to those plans proceeding as anonymous plaintiffs, it nonetheless implicates many of the same concerns about undermining the 'public's common law right of access to judicial proceedings," Snyder wrote. "As such, the Court finds that CIGNA must identify the ERISA plans on behalf of which it is pursuing this action."
Snyder is giving Cigna and its lawyers until the end of March file an amended lawsuit naming the employers it's representing -- and then she might decide the merits of the arguments.
If that happens and Snyder rules in favor of La Peer, ERISA plans and their administrators could face new challenges in using in-network providers as cost control strategies.
One of Cigna's lawyers, Gordon & Rees attorney Ronald Alberts, said they are going to file an amended complaint elaborating on the ERISA health plans, both self- and fully-insured. He's not entirely sure how broad of an impact the case could have, though.
"We cannot speak to any other ruling that may be made in the future, but believe the Court will ultimately agree that La Peer's misrepresentations made in connection with its claims to Cigna and waivers of patient responsibility are not permitted by law," Alberts wrote in an email.