Antitrust Law Daily Wrap Up, ANTITRUST—D.N.J.: Preliminary approval granted to $120 million settlement in antitrust, RICO action against Aetna, (Sep 3, 2013)

By Tobias J. Gillett, J.D., LL.M.

The federal district court in Newark, New Jersey, has granted preliminary approval to a $120 million settlement of claims brought against Aetna health insurance by its subscribers and healthcare providers alleging that Aetna colluded with a database provider and major health insurers to set artificially low reimbursement rates (In re Aetna UCR Litigation, August 30, 2013, Hayden, K.).

Aetna offers, underwrites, and administers health insurance benefits. Members of Aetna’s healthcare insurance plan (“subscriber plaintiffs”) and physician and non-physician out-of-network providers (“provider plaintiffs”) alleged that Aetna used databases licensed from Ingenix, Inc., a wholly-owned subsidiary of UnitedHealth Group, to set usual, customary, and reasonable (UCR) rates for out-of-network services despite knowing that the information in the databases was flawed.

Aetna’s use of the data allegedly resulted in artificially reduced reimbursements to the two groups of plaintiffs. The plaintiffs alleged that “Aetna, UnitedHealth Group, Ingenix, and most of the country’s largest health insurers” secretly and illegally agreed “to systematically under-reimburse consumers for out-of-network services” in violation of the Sherman Act, the RICO Act, and ERISA, as well as state law.

Under the terms of the settlement agreement, Aetna would pay a total of $120 million, with $60 million to be paid to a general settlement fund and $60 million to two prove-up funds—$40 million to a subscriber fund and $20 million to a provider fund. Settlement class members would be able to seek compensation from the prove-up funds with supporting documentation establishing a right to compensation under those funds, or from the general fund without such documentation.

Settlement. The court issued an order preliminarily certifying the settlement classes, granting preliminary approval of the settlement, and approving the class notice. The court found for settlement purposes under Federal Rule of Civil Procedure 23(a) that joinder of all members of the classes was impracticable, that the class representatives presented typical claims and would fairly and adequately protect the interests of the members, and that there were common issues of fact regarding “[w]hether Aetna’s use of the Ingenix databases or its other challenged reimbursement practices with respect to out-of-network services and supplies resulted in artificially reduced payments to Settlement Class Members” and “[w]hether Aetna’s use of the Ingenix databases or its other challenged reimbursement practices with respect to out-of-network services and supplies violated ERISA, RICO, or the Sherman Act.” The court also found the settlement satisfied Rule 23(b)(3).

The court approved the proposed means of providing notice of the settlement, which involved mailing the notice to absent class members located through reasonable diligence in Aetna’s records, and publishing the notice no more than three times in the legal notices section in USA Today and any other approved sources. The court scheduled a hearing on final approval of the settlement for March 18, 2014, and directed objectors to file written objections with the clerk and serve them on class counsel by February 26, 2014. Members of the settlement classes intending to appear at the fairness hearing must also file and serve their intents to object by February 26, 2014, and members of the class seeking to opt out must file a request for exclusion by that date. Members of the settlement classes seeking to receive a distribution from the funds must mail a claim form by March 28, 2014.

Objections. The court also issued a supplemental opinion addressing objections to the preliminary certification of the settlement classes and the preliminary approval of the proposed settlement agreement brought by UnitedHealth Group, Ingenix, and six plaintiffs. UnitedHealth Group and Ingenix (“the United defendants”) challenged the certification of the subscriber class on the grounds that it failed to satisfy the commonality and predominance requirements of Rule 23(a)(2) and Rule 23(b)(3).

The court concluded that the United defendants lacked standing to assert their objections to the class. Although the United defendants claimed they had a direct interest in the decision to certify the class because they still faced claims by the subscriber plaintiffs, the court found that preliminary approval of the class would not bind the court on the merits of the claims, and therefore the United defendants lacked standing. Moreover, the court determined “that it would be more appropriate to consider the viability of plaintiffs’ RICO and Sherman Act claims against the United defendants in the context of the pending motion to dismiss.”

The court also rejected objections by six ERISA plaintiffs to the adequacy of the ERISA representative plaintiffs and to the adequacy of the proposed settlement.

The case is No. 07-3541 (KSH) (CLW), MDL No. 2020.

Attorneys: James E. Cecchi (Carella, Byrne, Cecchi, Olstein, Brody & Agnello) for Plaintiffs. Liza M. Walsh (Connell Foley) for Defendants.

Companies: Aetna, Inc.; UnitedHealth Group; Ingenix, Inc.

Cases: Antitrust RICO NewJerseyNews