Antitrust Law Daily Wrap Up, ANTITRUST—3rd Cir.: Price fixing, conspiracy claims properly tossed in medical billing suit, (May 3, 2016)

By Greg Hammond, J.D.

Allegations brought by participants in employer-sponsored health care plans and medical associations—that various health insurers violated the Racketeering Influenced and Corrupt Organizations Act and Sherman Act by manipulating the use of usual, customary and reasonable rate data for billing—were properly rejected by the federal district court in Newark, New Jersey. The U.S. Court of Appeals in Philadelphia affirmed summary judgment entered against those claims, finding no abuse of discretion (Franco v. Connecticut General Life Insurance Co., May 2, 2016, Vanaskie, T.).

Three groups of insurance plan members and health care providers filed a series of class actions against Connecticut General Life Insurance Co. (CIGNA) and other insurance companies for alleged anticompetitive conduct in the manipulation and use of "usual, customary and reasonable" or UCR rate data to determine the amount of benefits owed to members of employer-sponsored health benefit plans when the members sought treatment from out-of-network health care providers. The plaintiffs claimed that the database resulted in the underpayment of out-of-network benefits to which plan members were entitled in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), the Sherman Act, and the Employee Retirement Income Security Act (ERISA). The federal district court in Newark granted summary judgment against the claims and the plaintiffs appealed.

Subscriber plaintiffs. The appellate court first affirmed the lower court’s summary judgment order with regard to the subscriber plaintiffs—participants in employer-sponsored health care plans administered by CIGNA, finding no abuse of discretion in the lower court’s decision to strike as untimely expert reports and deny class certification. In addition, the appellate court agreed that certain subscribers failed to allege an injury sufficient to permit them to maintain a RICO claim because they were not balance-billed for services rendered by their out-of-network provider.

Provider plaintiffs. The court, however, vacated dismissal of the ERISA claims brought by provider plaintiffs—health care providers who had not agreed to be members of CIGNA’s network of health care providers, finding that the provider plaintiffs had standing. The provider plaintiffs pleaded that they received an assignment of benefits from CIGNA for insureds, or a claim assignment through which the provider plaintiffs are paid directly by CIGNA. These averments, according to the appellate court, are sufficient to plead the existence of a valid assignment to support derivative standing.

Association plaintiffs. Nevertheless, summary judgment was properly entered with regard to the 14 medical association plaintiffs’ RICO, Sherman Act, and ERISA claims. The appellate court reasoned that in order to show a violation of RICO or the Sherman Act, detailed inquiries concerning health care providers’ billing practices and claims processing experiences with CIGNA would be necessary. The association plaintiffs therefore failed the third prong of the test for association standing for the RICO and Sherman Act claims.

The case is No. 14-3395 and 14-3396.

Attorneys: James E. Cecchi (Carella Byrne Cecchi Olstein Brody & Agnello) for Darlery Franco. William P. Deni (Gibbons PC) and Warren Haskel (Kirkland & Ellis) for Connecticut General Life Insurance Co.

Companies: Connecticut General Life Insurance Co.

Cases: Antitrust RICO DelawareNews NewJerseyNews PennsylvaniaNews