Cigna Sued for RICO Violations, “Brazen Embezzlement and Conversion Scheme” -Health Plan Litigation Tsunami: Part 2

Cigna Sued for RICO Violations, “Brazen Embezzlement and Conversion Scheme” -Health Plan Litigation Tsunami: Part 2

CIGNA is accused of violating the Racketeer Influenced and Corrupt Organizations Act, through a “brazen embezzlement and conversion scheme” allegedly defrauding patients, healthcare providers and self-insured health plans. According to court documents Cigna “allegedly engaged in a pattern of racketeering activity that includes embezzlement and conversion of funds, repeatedly and continuously using the mails and wires in furtherance of multiple schemes to defraud.

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.

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14 comments

Carol

Pull ALL their licenses, certifications, and close them down! So WHO is to monitor this scheming activity????

    RD

    I am an in network Cigna provider who they are also attempting to defraud by insisting that I pay back wages earned (already gross underpayment) six months ago. Apparently a patient had a secondary plan with another company which they neglected to tell me (likely they were not aware this was an issue.) Cigna as well did not inform me and originally paid the claims. Now more than 6 months later they are telling me that I am responsible for refunding them the entire amount I earned. I do not see how this is my responsibility. If they have the resources to discover multiple plans they clips have informed me sooner when I would have had a chance to address this.
    Now I’m being fleeced and have no idea if I will receive similar demands for the rest of my patients 6 months or even years from now. Indefensible.

Zak

The only way to end fraud perpetrated by health insurers against patients and providers is to replace private health insurance with a single payer system (Medicare For All). Neither repealing the ACA (Obamacare) nor expanding the ACA, e.g., through a public option, will achieve this goal (or the goals of universal coverage and cost containment/reduction).

Chris

The comment above is absurd. The solution to a problem created by the government is to create more government control? This problem and issue only exist because the government has created an unaccountable system of regulation and policies that protect insurers and employers from being accountable to the PATIENT. ERISA prevents PATIENTS from fair legal representation and recourse. The Government created this ERISA problem. Prior to ERISA, patients could obtain legal representation for issues like this. Now, ERISA PRE-empts legal actions away from traditional courts and into the kangaroo ERISA court system that does not allow for any type of punitive damage for PATIENTS. This shouldn’t occur. CIGNA should be bankrupt for this type of practice and the patients affected should be able to obtain punitive damages through appropriate legal recourse, which would help keep Insurers like Cigna from defrauding PATIENTS.

A single-payer universal system will inevitably create more problems like this. What we need is fair markets and a government that supports PATIENTS with meaningful regulations and protections for the market. A universal system in the US will only lead to unaccountable decision making by bureaucrats, health care rationing and cessation of provider innovation that can help improve Health Care for all patients.

    Alexa

    I would offer that it is actually a profit motive for healthcare and reimbursement itself that creates this problem. You can blame the government for a policy, sure, but when massive corporate greed is allowed to be the driving force in their actions, they will absolutely worm their way into government policy. This shift in representative power occurs when companies like CIGNA are allowed to “donate” large sums to representatives in exchange for favors.

    In addition, the existence of so many Payers and all their little rules actually restricts patients from seeing the providers who they prefer and are best for them…unless that provider does exactly what each insurance company wants and wastes time talking with their likely nonexistent provider “services”.

    All that said…Insurance companies literally exist to profit from reimbursement. Without any major changes, they will always bring policy back into a favorable place for them, not the patient or provider.

Ike

My only quibble with the article is the “further scrutiny of self-insured health plans”. The real issue is the out-out monopoly of the big five. Cigna went too far, clearly, but the other four walk a legal fine line in both the fully insured and ASO space.

It’s “legal” graft and corruption. In many states you have a single dominant payer with true self insured/TPA options having little to no chance of breaking into the market and offering an alternative.

This isn’t a self-insured issue, it’s a BUCA issue and a government that does not push for full healthcare transparency and consumerism.

David Fields, MD

There is another solution beyond “Medicare for all.” It’s prosecution by attorneys-general for fraud AND HOLDING THE EXECUTIVES IN CHARGE RESPONSIBLE FOR GRAND LARCENY. A few jail sentences for insurance company CEO’s and other other higher-ups would almost certainly make a huge difference. When he was Attorney-General of New York State, Andrew Cuomo successfully prosecuted such a suit against United Healthcare, Ingenix (which subsequently changed its name to Optum)(sound familiar?) and other insurers that used the fraudulent Ingenix out-of-network usual and customary data to defraud patients and doctors. Unfortunately, the settlement resulted only in monetary damages. If he had insisted on criminal prosecution of the responsible insurance company executives, we would not now have the problems that we do.

    Linda Marshall

    Actually, with the ingenics situation in New York. I believe that the insurers were required to use a non- biased database to determine rates. the problem is that this was only a 5 year requirement, so despite acknowledging their “regret” in 2019, as soon as the 5 years ended, they quickly negotiated contacts with Multiplan to do the exact same thing! Absolute BS. What we need is out-of- network union representation and lobbyists! The problem is, we don’t have deep pockets in large part because we have been robbed for years by the insurance carriers!

MP

This is very believable…it is Cigna’s and insurance companies, standard practice. The problem is that the public doesn’t know this is happening. We as physicians get vilified as “charging too much” when it’s the insurance company that is stealing the reimbursement money. This needs be reported in the mainstream media so that the public outrage will incur. That’s the only way this will even begin to subside. More importantly, the concept of “networks” needs to be abolished. The whole concept of “networks” needs to be abolished. This is a scam perpetrated by insurance companies and Medicare to eliminate the options patients have to choose their physicians or hospitals. Think of your auto or homeowner’s insurance policy. If you have an auto accident, you are free to choose any shop to do your repairs including the most expensive option: the dealership (how many times have you heard stories of a minor “fender-bender” becoming 10s of thousands of dollars in repairs?). The auto insurance company is not allowed to tell you which shop to use. There are no “in” or “out” of network repair shops. If you have auto insurance, the company is obligated to pay the bill directly to the shop. Likewise for homeowners insurance. If you have a claim for water damage, snow, fire, etc., you are able to choose any electrician, plumber, framer, roofer, contractor, etc., you believe will do the best job (within your policy limits). The insurance company cannot tell you who to use. However, when it comes to your HEALTH, the insurance company WILL tell you who you can and cannot use for your care. You are not allowed to choose the best neurosurgeon, cardiologist, anesthesiologist, etc. The insurance companies contract with the lowest cost doctor to save the insurance company money and pay outrageous salaries to their CEOs. The American public for years has been so brainwashed into accepting the concept of health insurance “networks” that we no longer even question the concept. The insurance companies are now working tirelessly to convince our legislators of the same thing. The public needs to wake up and battle the “network” issue. If you have health insurance, you should be able to see any doctor or hospital you wish. Eliminate “networks” from health insurance. Your health (and life) are more valuable than car or house. “Medi-no-care For All” is NOT the answer. Simply make the insurance companies pay as they are supposed to do.

    Quentin L. Ledford, ChFC, RICP, CASL

    There are a lot of issues the public is not aware of and which I have written about to many legislators, none of whom want to confront the constituents of the American Medical Association who continue to line the coffers of these legislators.

    First, with the creation of these networks, insurers cut a deal with the medical establishment to keep ALL medical costs secret in exchange for keeping a guaranteed percentage of the spoils (the premiums we pay).

    Second, insurers do NOT know what their competitors are paying for the same claims (so in EVERY region of the U.S. there is always ONE insurer receiving a minimum of a 30% discount on hospital based expenses over its competitors.

    Third, the large hospital corporations have been DICTATING the in-network pricing (called reimbursement rates) to the insurers. However, the pricing (over which neither small local hospitals nor the 95% of ALL physicians who are not AMA members have NO say whatsoever) are deliberately manipulated to put small local hospitals and all independent physicians OUT OF BUSINESS !!!

    Fourth, the AMA controls Medical School Accreditation, including not only their curriculum (which is deliberately designed to avoid the topics of nutrition and preventative medicine as MUCH as is possible), but also the number of domestically produced physicians they allow in the field each year. This number (capped at about 70,000 for the past 60 years) assures that the U.S. continuously has a physician shortage and MUST import doctors from foreign countries to meet its needs.

    Kathleen Bonner RN, BSN

    You are exactly right. This is standard practice and the member/consumer/patient has absolutely no idea about any of it. Cigna continues to send OON claims to Zelis and Data ISight routinely and these entities determine their “negotiated amounts” based on a percentage of Medicare which is by no means an out of network benefit OR the benefits the member is paying for if the plan determines OON allowable based on MRC1/80% Fair Health. This goes on every single day and Cigna defiantly refuses to reprocess claims that are MRC1 holding their members accountable for Cigna’s failure to meet their fiduciary responsibility to their member. This is an egregious violation of the members fundamental rights and no one holds the insurance company accountable.

PATRICIA TARAZI

Zelis goes to Cigna to reprice claims. Is it legal for Cigna to give Zelis a Dr’s prices and are the prices negotiated and agreed upon by the Dr?

Quentin L. Ledford, ChFC, RICP, CASL

I am not a bit surprised either.

I’ve been saying for years now that health insurers no longer function as insurance companies. They merely act a ‘bag man’ for the medical mafia.

In most regions throughout the U.S., CIGNA and other carriers cannot compete with the networks of the BCBS associations (since many of these are not only non-profit, but also receive a minimum of a 30% discount for hospital based claims below the costs of competing carriers).

The article demonstrates though, the flip side of the coin, out-of-network shenanigans.

It also demonstrates the real necessity that an orderly market based upon free market enterprise principles whereby ALL care costs are FULL transparent by and between ALL parties, and that ALL network contracts (the mastermind for monopolization created by the AMA) be totally jettisoned from the system.

Such would be as simple as merely creating a tiered provider elective participation incremental percentage pricing grid using the established Medicare Reimbursement Rates as the basis, and compelling ALL insurers to price their policies in accord with each pricing grid whereby consumers can select the level of coverage they believe is appropriate.

C Hespeth

What I d plano for a living is assist the meme/patients with cases exactly like this. Zelis will apply a huge “recommended” bogus savings and Cigna will present the bogus savings as if the out of network provider agreed to the reduction. This is always medical expense incurred in emergent situations. ER doctors, anesthesiologists, ground ambulance, and air ambulance. Then they have the audacity to instruct the member to call Zelis. Presenting the bogus discount as a real savings is false and also directing the member to call Zelis is outside of the insurance contract between the member and the plan. they give the provider a run around and can never present evidence to support the savings. Currently working on an issue where they reduced a bill by $34k for an emergency surgery. The ACA mandates that the plan apply Medicare rates, a maximum allowable rate, or reasonable and customary. Zelis uses none of these. IF the plan used one of three we can only recommend fling an appeal. These companies fight us tooth and nail and drag out this process for months. Most of the plans we do work for are ERISA plans. I am glad i fell across this article because I intend to share this with the member, broker, and group and the obvious fraudulent practices used to grossly underpay these providers. As a consumer and advocate it is frustrating that people have to fight so hard to have a claim paid at a fair rate. Especially, when they pay extremely high premiums for theri health insurance.

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