Judge Gives Initial Nod to $350 Million Pact in Class Action Against United Healthcare

Since i have been keeping up with the health care plans and packages i found this article about a judge in New York that has approved a $350 million settlement which will reimburse patients as well as doctors and even help out lawyers.

A federal judge in New York has granted preliminary approval to a $350 million settlement of a class action alleging United Healthcare Corp. shortchanged 21 million patients and doctors on reimbursements for medical claims.

Plaintiffs lawyers would get up to 25 percent of the settlement in fees.

U.S. District Judge Lawrence McKenna said in an opinion filed last week that proponents of the pact were convincing, and that objectors failed to demonstrate that the insurance company was getting off cheap.

The suit accused UHC of using a rigged database to determine the amount of reasonable reimbursements for out-of-network medical treatments.

Objectors represented by a New Jersey firm that started the litigation nine years ago, Wilentz, Goldman & Spitzer, presented evidence that the difference between the value of claims submitted to the company and the amounts paid was $26.4 billion.

But McKenna ruled that the damages were $4.76 billion at the most and that $350 million was fair because there was no guarantee the plaintiffs would prevail if there were a trial in the case, American Medical Association v. United Healthcare Corp., 00-2800.

The settlement covers a companion case in federal court in Newark, N.J., against a UHC subsidiary, OxfordHealthplans Inc.

The chief question following the approval is whether the settlement will lead toward a resolution of similar class actions in Newark against Aetna Health Inc. and Cigna Insurance Co. The defendants in the Newark cases figured their reimbursement rates by using the same allegedly flawed database that UHC used: a product of Ingenix, a UHC subsidiary.

"I don't want to predict, but obviously the settlement will have an impact in that it provides either a model or a number that parties will be looking at," says D. Brian Hufford, the lead plaintiffs counsel in the UHC and Aetna cases.

Some of the facts are different and the UHC case took nine years to develop, but it is a "relevant point" for the New Jersey claims, says Hufford, of Pomerantz Hudak Grossman & Gross in New York.

But objectors' lawyer Barbara Quackenbos, of the Wilentz firm in Woodbridge, N.J., says it's a bad model because the millions of class members in the UHC case could have done much better. On Tuesday, the firm asked the 2nd U.S. Circuit Court of Appeals to reverse McKenna's approval.

Bruce Nagel of Nagel Rice in Roseland, N.J., whose firm is co-lead counsel for one group of plaintiffs in the Cigna case in Newark, says the better model would be an Ingenix database settlement with HealthNet Insurance Co. last year. In that class action, he says, the potential damages were pegged at $450 million and the case settled for $255 million.

Nagel says of the UHC deal, "It stinks because it's for a fraction of the value. It's way too low and will not be relevant to what we are doing in Cigna in New Jersey."

A DELTA TOO WIDE

Last year, after evidence in the class actions against the Ingenix database attracted the attention of the attorney general's office in New York state, UHC agreed in a consent order to pay $50 million to researchers at a nonprofit consortium headed by Syracuse University to develop a new system.

Pomerantz Hudak and Wilentz Goldman were co-lead counsel in the UHC litigation until they split over whether to settle.

Making a separate peace, Pomerantz Hudak, on behalf of the AMA, reached the agreement with UHC on the $350 million last year, but plaintiffs represented by the Wilentz firm objected. The firm argued at hearings in March and April and again in September that more litigation would yield an even bigger pay day for the class.

The objectors argued that the "delta" -- the gap between the claims and the reimbursements -- was too large to justify a $350 million settlement.

McKenna, though, found the data showed the gap wasn't as large as the objectors claimed. He also rejected arguments that the settlement would release the insurance company from reimbursing too many subscribers, including almost 9 million whose claims had nothing to do with the Ingenix database.

He said that if the plaintiffs had to try the case they would have to prove the Ingenix database was flawed, and legal roadblocks -- such as whether the plaintiffs had exhausted administrative remedies -- would remain.

"A reasonable result, for reasons some of which have been mentioned, is by no means assured, and the amount of recovery in the event of success, could be quite small compared to the deltas suggested," he concluded.

Hufford says $12 million in interest accumulating since the company agreed to the pact earlier this year will be added to the $350 million if McKenna grants final approval after class notification and a fairness hearing.

But in his appeal of McKenna's approval, Wilentz partner Barry Epstein said that after deductions for legal fees and administrative costs, the net recovery for the 21 million class members would be only $250 million.

He said McKenna erred by refusing to permit discovery about the damages and by including the 9 million non-Ingenix claimants in the class. And he said the class notice in the settlement doesn't give members enough information to make a rational decision about whether to opt in or out.