California is latest state to join nationwide class action litigation

APAPO is working closely with outside counsel and the California Psychological Association to provide support for legal action against WellPoint Blue Cross Blue Shield

by Legal and Regulatory Affairs Staff

June 30, 2009 — The California Psychological Association (CPA) and psychologist James Peck, PsyD, filed a class action complaint on June 23 against the nation's largest health insurer, WellPoint Blue Cross Blue Shield, in federal court in Sacramento. The APA Practice Organization (APAPO) is working closely with outside counsel and CPA to provide extensive legal, policy, communications and other support for this legal action.

WellPoint is a conglomeration of for-profit Blue Cross Blue Shield (BCBS) companies in 14 states covering more than 35 million insured individuals. The WellPoint companies are: Anthem Blue Cross of California; Empire BCBS of New York; and Anthem BCBS of Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, Ohio, Virginia and Wisconsin.

The suit alleges that the company used a flawed database owned by Ingenix, a subsidiary of United Healthcare, to suppress the "usual, customary and reasonable" (UCR) rates utilized to pay for out-of-network services. Dr. Peck, of Santa Monica, California, brings suit on behalf of a nationwide class of psychologists and other non-physician providers who were underpaid for their out-of-network services because WellPoint used the Ingenix database.

The complaint seeks damages under the Employee Retirement Income Security Act (ERISA), the federal anti-racketeering law known as RICO and antitrust law for past underpayments. Further, plaintiffs will seek changes to make WellPoint's out-of-network rate setting fairer and more transparent.

Last month we announced in this e-newsletter that the New Jersey Psychological Association (NJPA) was poised to become a named plaintiff in the parallel nationwide class action litigation against Aetna in federal court in New Jersey. As in the California case, the New Jersey legal action alleges that use of the Ingenix database resulted in underpayment for out-of-network services. In accordance with the scheduling order recently issued in that case, the amended complaint adding NJPA as a party will be filed on July 1.

Related developments
On a related note, the New York State Attorney General's office announced on June 18 a settlement agreement whereby Health Net, Inc. will end its relationship with Ingenix in setting out-of-network rates and will contribute $1.6 million toward the creation of a new, independent database to calculate these rates. The Health Net settlement is one of 12 total settlements that New York State Attorney General Andrew M. Cuomo has reached with national and regional health insurers to reform what his office found to be a corrupt out-of-network reimbursement system.

The New York Insurance Department also released regulations seeking to correct flaws that Cuomo's office had confirmed in its investigation of the Ingenix database. These regulations would require, among other things, that health insurers as well as HMOs use an independent source for determining usual and customary rates, and that these rates fairly and accurately reflect market rates.

The Attorney General's investigation was prompted by facts discovered during the course of the class action lawsuit initiated by the American Medical Association (AMA) and others against United Healthcare challenging the calculation of out-of-network reimbursement rates. The United Healthcare lawsuit is currently pending in federal court in New York.

United has entered into a proposed settlement agreement with the plaintiff class, agreeing to pay $350 million to the various plaintiffs, including out-of-network psychologists. However, because there are objections as to the adequacy of the proposed settlement amount, the court has requested additional information prior to deciding whether to grant preliminary approval of the settlement.

APAPO will continue to update members on the status of this proposed settlement and, should it be approved, will provide details on how psychologists might participate in this settlement.

In both the CPA and NJPA cases, APAPO is following the model for class actions that the organization employed with the Florida Psychological Association in the Florida managed care class action that resulted in $15 million in settlements. That model of collaboration was originally developed when APA supported non-class action lawsuits filed in the 1990s by CPA against Aetna and by NJPA against MCC (subsequently acquired by CIGNA), both of which led to successful settlements in 2000.

APAPO seeking psychologists affected by Ingenix database
As part of its continuing investigation into how psychologists have been impacted by managed care companies' improper use of the Ingenix database, APAPO is seeking to identify psychologists impacted in the following specific ways:

  • They provided and billed for out-of-network services to patients insured by major insurers, and

  • The insurer reduced the billed rates or amounts paid to the psychologist

The APAPO is interested in hearing from any psychologists who experienced this type of treatment by any of the major health insurance companies. Given pending court deadlines, we are particularly interested in hearing from any psychologists who have dealt with CIGNA or Aetna.

If you are aware of psychologists who meet these criteria, please contact APAPO's Office of Legal & Regulatory Affairs by e-mail or phone, or 800-374-2723, ext. 5886.