The Humana Settlement: Questions and Answers for Practitioners

by Legal and Regulatory Affairs Staff

September 26, 2007 — APA members who submitted claims to the Humana settlement recently began to receive payout checks.

This settlement resulted from nationwide managed care class action litigation in federal court in Florida. In this lawsuit, a class of psychologists and other non-physician health professionals, along with the Florida Psychological Association, has alleged that the managed care company defendants conspired to reduce and delay provider payments in violation of federal law.

Humana represents the second settlement in this case that the APA Practice Organization (APAPO) and its outside attorneys negotiated on behalf of psychology. The first settlement was with CIGNA.

The APAPO has received a number of questions from members regarding the Humana settlement, particularly related to the size of payouts made to claimants. Answers to these questions follow.

Q. What determined the size of settlement payments to individuals?

A. The Humana settlement fund was divided among the class members who submitted timely, valid claims. Individual payouts differed depending on how much business a claimant did with Humana. Class members who had a higher volume of claims with Humana received larger shares.

The “base amount” share of approximately $18 was paid to those who had a volume of claims with Humana between $0 and $25,000. (Those who did no business at all Humana but did do business with one of the other defendants in this case — such as CIGNA, Aetna, WellPoint and Anthem — received the base share. Many psychologists who submitted claims were in this category.) Multiples of the base amount were paid to claimants who had a higher dollar volume of business with Humana during the period covered by the class action lawsuit.

Q. Why were the payments smaller in the Humana settlement than in the CIGNA settlement?

A. In the Humana settlement, more claimants submitted claims against a smaller pot of settlement funds compared to the CIGNA settlement.

The CIGNA settlement had a larger settlement fund — 11.5 million — primarily because it is a larger company. That settlement pot was distributed among 15,500 claimants; the “base amount” share paid to claimants in the CIGNA settlement was about $212.

With Humana, the $3.5 million total settlement amount was considerably smaller, yet there were 19,500 claimants — 4,000 more than in CIGNA. Therefore, less money was divided among more claimants in the Humana settlement.

Q. What impact does the settlement have on the managed care industry?

A. The effect of the settlements in this litigation is cumulative, both in terms of the financial impact and policy changes. The Humana settlement is the second in what the APA Practice Organization hopes will be a series of settlements with remaining defendants in the case, particularly the Blue Cross Blue Shield companies in our companion case against those companies.

The financial impact of the CIGNA and Humana settlements so far totals $15 million, in addition to the cost of implementing the policy changes. In both of these settlements so far, the companies have agreed to a broad array of policy changes that will improve the way that the companies deal with psychologists and plan subscribers over a period of years (addressed in the final answer below).

Q. What are the policy changes in the Humana settlement?

A. While the dollar amounts in these settlements are important, the policy changes that the companies agree to may have a broader impact and provide a long-term benefit to psychology. Following is a brief overview of the policy changes, which are similar to those in the CIGNA settlement, with minor variations. As a result of the settlement, Humana will:

  • Use its website to make various transactions with psychologists easier and faster, while also making its policies and procedures more transparent.

  • Change the way the company defines and determines the critical question of whether treatment is “medically necessary,” to give greater deference to the judgment of individual psychologists and APA. For example, “medical necessity” will be redefined to consider the perspective of a “provider exercising prudent clinical judgment.”

  • Modify its “prompt payment” policies such as by developing a system for paying interest on electronically filed claims that are not paid within 15 days, and giving notice to the psychologist in 15 days if the company needs additional information to process the claim.

  • Update provider panel listings promptly. This addresses the “phantom panel” problem whereby consumers find that psychologists in the provider listing are no longer on the panel.

  • Allow the APA Practice Organization to appoint a psychologist to Humana’s national Health Care Provider Advisory Committee, which was created by the settlement. The APAPO selected Dr. Paul Berman, director of professional affairs for the Maryland Psychological Association, as our representative; he has attended the committee’s first meeting. Having such representation gives psychology a voice in the process of developing and implementing company policies.

  • Be limited in its ability to recoup past overpayments to psychologists; and,

  • Enhance mechanisms for resolving disputes with the company over medical necessity and billing practices.

  • These policy changes are available to psychologists in the settlement class who do business with the company now and for the next several years.

If you have reason to believe that Humana is not abiding by the terms of the settlement relief described in this Q and A, please contact legal and regulatory affairs staff for the APA Practice Organization by sending an e-mail or calling 202-336-5886.