The Blog

This extraordinary lawsuit comes on the heels of a massive settlement, where CIGNA and American Specialty Health agreed to pay $20M after they were accused of misrepresenting medical expenses by concealing material information.

CIGNA Health and Life Insurance Company is one of the “big five” which represents the five largest health insurers in the United States. Prior to acquiring Express Scripts in 2018, Cigna relied heavily on its Third Party Administrator platform, providing services to health plans of all sizes for private commercial health plans as well as state and local government plans.

Among CIGNA’s customers are many large, well known, national companies that reach across different sectors of the economy, from banking to manufacturing to retailers.

According to the 150 page complaint: “Plaintiffs bring this lawsuit to expose Cigna’s brazen embezzlement and conversion schemes, through which it maximizes profits by defrauding patients, healthcare providers, and health plans of insurance out of tens of millions of dollars every year… The result is that Cigna succeeds in shifting financial responsibility for covered expenses onto the backs of patients, their employers, and Plaintiffs, while Cigna gets rich.”

This latest case seems to be the culmination of a spate of recent cases alleging similar violations. This troubling pattern may be an indication that no employer sector is immune to possibly fraudulent claims processing practices. All of this seems to provide more evidence of increased scrutiny for self-insured health benefits that has long been commonplace for retirement benefits.

Case info: Advanced Gynecology and Laparoscopy of North Jersey.et. al. v. Cigna Health and Life Insurance; Case Number: 2:19-cv-22234 in the United States District Court for the District of New Jersey, Filed December 31, 2019.

In summary, the lawsuit alleges that CIGNA accepts the out-of-network provider’s claims at the full billed charges and requests the same amount from the self-insured health plan. However, instead of paying the medical provider or member, CIGNA hires a Repricing Company to try and negotiate a reduction. If the provider refuses to negotiate, CIGNA pays the claim at an exorbitantly low level but appears to keep the difference between what was removed from the self-insured health plan and what was paid to the medical providers. In an attempt to conceal this from the patient and self-insured health plan, CIGNA issued Electronic Remittance Advice or paper Explanation of Benefits forms (collectively, the “EOB”) misrepresent the balance as “Discount” to the members, certifying the member is not responsible for the balance, while simultaneously representing the balance to the Plaintiffs as member liability or “Amount Not Covered”.

Astonishingly, the complaint alleges that CIGNA, after being advised of these anomalies, not only refused to correct the issues but instructed the medical provider plaintiffs to sue to rectify the situation! According to the court documents:

“After numerous detailed communications with Cigna management in which Plaintiffs protested Cigna’s unlawful processes and procedures, Cigna informed Plaintiffs that it has no compliance department capable of addressing these issues, and encouraged Plaintiffs to initiate legal action in order to prompt Cigna to act. Plaintiffs have decided to follow Cigna’s suggestion.”

The complaint further alleges that CIGNA has violated the Racketeer Influenced and Corrupt Organizations Act, (RICO) through four distinct schemes:

1. misrepresenting that a contract or agreement exists between the Plaintiffs and CIGNA or its vendor “Repricing Company”;
2. conspiring with its vendor “Repricing Companies” to submit fraudulent “Savings Fees” to the self-insured health plan;
3. attempting to conceal the scheme by altering the Explanation of Benefits (EOB), sent to the medical provider and to the patient for the same claims, where the patient’s EOB represents the outstanding balance as a negotiated “Discount”, however the medical provider’s EOB shows the outstanding balance as the “Amount Not Covered”;
4. again conspiring with its vendor “Repricing Company” by coercing the Plaintiffs to accept exorbitantly low reimbursements;

Ironically, CIGNA has been at the forefront of initiating litigation against out-of-network providers for not collecting patient liabilities in full. Yet, this suit alleges CIGNA misrepresents the balance of unpaid claims as “Discounts” to its members.

This case also alleges that CIGNA’s claims process for out-of-network claims, including the Cigna Claims, violates the “HIPAA standard transaction rules under 45 C.F.R. § 164”, by using incorrect “45” coding combinations”. The complaint also alleges CIGNA has violated the “uniform operating rules for the exchange of Automated Clearing House (“ACH”) electronic fund transfer payments among financial institutions that are used in accordance with Federal Reserve regulations and maintained by the Federal Reserve and the Electronic Payments Associations, known as the National Automated Clearing House Association or “NACHA.”

The first scheme allegedly involves CIGNA’s use of the “mails or wires to misrepresent to Plaintiffs, Cigna Subscribers, and the Cigna Plans, that Cigna underpaid Plaintiffs’ claims either because of a contract between an individual Plaintiff and Cigna as an in-network provider or with a third-party leasing contractor or negotiator couched as a repricing company (“Repricing Company”) to accept discounted rates (the “Fictitious Contracting Scheme”).”

The Plaintiffs allege they are not in-network nor have they agreed to any reductions with the “Repricing Company”. According to court records, “While repricing of in-network claims is permissible when there is an existing contract between a provider and Cigna, Plaintiffs are out-of-network providers who have not contracted with Cigna or any Repricing Company. Cigna profits from improperly withholding these payments from Plaintiffs by transferring ERISA Cigna Plan trust assets to a Cigna controlled bank account (which it otherwise is entitled to do under contracts between the ERISA Cigna Plans and Cigna) and earning interest off of funds that are rightfully Plaintiffs’ under the ERISA Cigna Plans. Cigna also embezzles or converts ERISA Cigna Plan trust assets by charging the ERISA Cigna Plans improper “cost-containment” fees.”

The complaint goes on to allege that CIGNA’s second scheme to defraud involves its conspiring with the Repricing Companies to “underpay Plaintiffs’ Cigna Claims via a euphemistically named “cost-containment process” that it misrepresents to the Cigna ERISA Plans as a cost-savings mechanism to save the Cigna ERISA Plans money on out-of-network claims administration (the “Repricing Reduction Scheme”).”

Plaintiffs allege that through this scheme, every out-of-network claim is sent through the wires to a Repricing Company where the Repricing Company recommends to CIGNA that CIGNA pay a deeply slashed reimbursement rate. CIGNA invariably adopts that recommendation and processes the claim for (under)payment. Additionally, the complaint alleges that “Cigna’s contracts with the Cigna ERISA Plans falsely state that this process is only applied to claims for which the Repricing Company has an existing contract with an out-of-network provider. Cigna uses these gross misrepresentations as cover for its embezzlement or conversion of ERISA Cigna Plan trust assets in the guise of cost-containment fees based on a percentage of the “savings.” Cigna then pays a commission to the Repricing Companies that is similarly based on a percentage of “savings.”

According to Plaintiff’s allegations, CIGNA’s third scheme to defraud involves its false and inconsistent statements on CIGNA-issued EOBs and is referred to as the “Contradictory EOB Scheme”. When processing a claim by an out-of-network provider, the suit alleges, “Cigna will state on an ERA or EOB issued to a healthcare provider (a “Provider EOB”) that the amounts wrongfully retained by Cigna are not covered under the terms of the pertinent Cigna ERISA Plan or are subject to certain “adjustments” that are inconsistent with the terms of the Cigna ERISA Plans. But on the EOBs issued to the Cigna Subscribers for the same claims (the “Patient EOB”), Cigna will report completely different information. Cigna may falsely state that Plaintiffs are either contracted with Cigna to accept certain rates, or have agreed with Cigna or a Repricing Company to accept a “discount;” both complete fabrications.”

By way of the example provided in the complaint, it appears CIGNA has told the provider:

“the unlucky Cigna Subscriber owes it $60,316.07 as the amount not covered under the Subscriber’s Plan, but has told the Subscriber that he/she owes the provider only $895.25 because Cigna negotiated a 98% discount with the provider. In doing this, Cigna misrepresents to Cigna Subscribers that the amounts improperly adjusted by Cigna are “discounts.” This misrepresentation appears on most Cigna Claim Patient EOBs.”

The suit alleges CIGNA’s fourth scheme to defraud involves its conspiracy with the Repricing Companies to force out-of-network providers like Plaintiffs to enter into negotiations for payment of valid claims, with the goal of either coercing or wearing down the providers so they accept drastic underpayments for the claims (the “Forced Negotiations Scheme”). In conspiracy with CIGNA, the Repricing Companies, such as Zelis or Medical Audit & Review Solutions (MARS), send offer letters through the mails designed to intimidate and coerce out-of-network providers such as Plaintiffs to accept the settlement offers. In some instances, the Repricing Companies will threaten that the services provided to the Cigna Subscriber will not be covered at all, or that they will be reimbursed at a percentage of the Medicare rate. And, as expected, the Pricing Companies will reimburse the providers even grossly insufficient amounts only if the provider waives all rights to additional payment.

According to the complaint, “the following is an example of Cigna’s Forced Negotiations Scheme, “whereby a provider Plaintiff rejected an offer of payment for $30,550 of total incurred charges of $41,680 from MARS, a Repricing Company contracted by Cigna. Once the provider refused the settlement offer, Cigna processed the claim, improperly misstated that the Cigna Plan covering the Cigna Subscriber only paid a percentage of Medicare, and reimbursed only $1,858.55, or 4.5% of the total incurred charges for the services rendered by the provider Plaintiff.”

“Through these four schemes, Cigna improperly deprives Plaintiffs and the Cigna ERISA Plans of funds and profits by engaging in any or all of the following conduct, among others: (1) embezzling and/or converting the amount characterized as a “discount” on the Patient EOB that is rightfully due and owing to the Plaintiffs under the terms of the Cigna ERISA Plans; (2) earning interest on these amounts, and (3) wrongfully profiting through embezzlement and/or conversion of ERISA Cigna Plan trust assets based on cost containment fees calculated as a percentage of the “discounted” amount.”

-According to court records

All ERISA health plans, medical providers and patients must educate themselves in order to understand the facts of these cases. For years, Cigna’s processes have been a thorny issue for out-of-network providers across the nation and now, self-insured plans are starting to feel the pain of these potentially illegal practices.

Medical providers must be proactive and adopt compliant practices and policies. Health plans must also be proactive in validating that plan assets are used to pay for their member’s medical expenses or otherwise get returned to their plan, and not applied to cover shortfalls in another plan.

Avym Corp. has advocated for ERISA plan assets audit and embezzlement recovery education and consulting. With new Supreme Court guidance on ERISA anti-fraud protection, we are ready to assist all self-insured plans recover billions of dollars of self-insured plan assets, on behalf of hard-working Americans. To find out more about Avym Corporation’s Fiduciary Overpayment Recovery Specialist (FOR) and Fiduciary Overpayment Recovery Contractor (FORC) programs contact us.