Antitrust Law Daily Wrap Up, RICO—D. N.J.: Class certification denied in reduced health benefits RICO case, (Apr 16, 2014)

By Linda O’Brien, J.D., LL.M.

In a proposed class action against health insurance services companies for reduced benefits for out-of-network provided services, the federal district court in Newark has denied class certification to a group of insurance plan members for failure to show that common questions of law or fact predominate the case (Franco v. Connecticut General Life Insurance Co., April 14, 2014, Chesler, S.).

Three groups of insurance plan members and health care providers filed a series of class actions against Cigna and other insurance companies for alleged anticompetitive conduct in the manipulation and use of “usual, customary and reasonable” (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 (ONET) health care providers. The plaintiffs claimed that the database, maintained by Ingenix, resulted in artificially low UCRs that resulted in the underpayment of ONET benefits to which plan members were entitled in violation of the Racketeer and Corrupt Organizations Act (RICO) and Employee Retirement Income Security Act (ERISA). The member plaintiffs moved for class certification.

RICO class. The plaintiffs failed to show that common questions of law or fact predominate over individual issues regarding the proposed RICO class. The plaintiffs alleged that the underpayment of benefits under the insurance plan was due to Cigna’s failure to perform under the plan by denying benefits that were due to members. In rejecting the plaintiffs’ argument that their losses consisted of premium payments for inferior health insurance, the court noted that a sufficient redressable injury required proof that the members in fact overpaid their ONET provider for services. In this case, the member plaintiffs did not demonstrate that either fraud or the existence of an injury redressable by RICO could be proven as to the entire class based on common evidence.

ERISA class. The plaintiffs also failed to meet the predominance standard regarding the proposed ERISA class. They failed to show that the Cigna plan language regarding UCR-based ONET benefits was sufficiently uniform to apply to the entire class’s claim to recover benefits or that damages could be measured on a classwide basis using common proof.

Issue certification. Finally, the court declined to certify a liability-only issue class on the issues of whether Cigna and Ingenix formed an enterprise and whether Cigna engaged in a pattern of mail and wire fraud. Certification of the RICO issues would not materially advance the resolution of the claims. Even if the question of whether Cigna and Ingenix formed an enterprise could be resolved as to all members of the RICO class, substantial liability questions remained without a member-by-member and claim-by-claim analysis of the alleged failure to perform as promised under the plan, the court concluded.

The case is No. 07-6039.

Attorneys: Barry M. Epstein (Epstein & Quackenbos, P.C.), Bruce H. Nagel (Nagel Rice, LLP), James E. Cecchi (Carella Byrne Bain Gilfillan Cecchi Steward & Olstein, PC), Stephen A. Weiss (Seeger Weiss), and Christopher Burke (Scott+Scott) for Darlery Franco, David Chazen and Camilo Nelson. Brian J. McMahon (Gibbons P.C.) and William H. Pratt (Kirkland & Ellis LLP) for Connecticut General Life Insurance Co., Cigna Corp., UnitedHealth Group Inc., and Ingenix Inc.

Companies: Connecticut General Life Insurance Co.; Cigna Corp.; UnitedHealth Group Inc.; Ingenix Inc.

Cases: RICO NewJerseyNews