A federal judge has approved a $255 million settlement against Health Net Inc. and several regional subsidiaries to settle three class action suits charging that it improperly reimbursed members for claims when they went to out-of-network providers.
The suit contended that the errors were related to the use of a flawed database from Ingenix, a subsidiary of United Health Group. The reimbursement issues may have affected as many as 2 million people in several states, and the class period extends back to 1997.
Health Net was charged wih violations of the Employee Retirement Income Security Act (ERISA), New Jersey's employer health plan law and the federal Racketeer Influenced and Corrupt Organizations Act because it systematically underpaid Health Net Insurance Plan members.
By settling the class action suit, Health Net did not admit liability, said attorneys from the law firm of Wilentz, Goldman & Spitzer, which represented the plaintiffs.
Under the settlement, approved by U.S. District Court Judge Faith S. Hochberg, Health Net will pay $215 million to more than 2 million participants in its health insurance plans who are members of the certified class, in addition to making business practice changes valued at $40 million.
The cases that were settled were known as Wachtel v. Health Net, McCoy v. Health Net and Scharfman v. Health Net.
The trustworthiness of the Ingenix database also was raised as an issue in February, when New York Attorney General Andrew M. Cuomo charged that the database contains defective and manipulated numbers used by most major health insurance companies to set reimbursement rates.
At the time, Cuomo said he was issuing subpeonas to 16 major health insurers as part of an investigation into reports of a scheme by health insurers to defraud consumers by manipulating reimbursement rates for out-of-network services.
With the insurers' health plans, members pay a higher premium for the right to use out-of-network doctors. In exchange, the insurers promise to cover up to 80 percent of either the doctor's full bill or the "reasonable and customary" rate, depending upon which is cheaper.
The investigation charged that by distorting the "reasonable and customary" rate, the insurers were able to keep their reimbursements artificially low and force patients to absorb a higher share of the costs.