Supreme Court Says Doctors’ Suit Against Insurers Can Proceed

January 28, 2005

From the Daily Business Review:

In a setback for the health insurance industry, the U.S. Supreme Court this month refused to review a Miami federal judge’s ruling to grant class certification to doctors alleging that health insurers improperly reduced their payments.

The case, which could cost six of the nation’s largest managed health care insurers billions of dollars in damages, will continue on toward its September trial date before U.S. District Judge Federico A. Moreno.

Harley S. Tropin, a partner at Kozyak Tropin & Throckmorton in Coral Gables, Fla., who is one of the attorneys for the plaintiffs, expressed relief. “We’re excited to get away from the procedural maneuverings and we’re preparing to try the case before Judge Moreno and a jury,” Tropin said.

Kent Jarrell, spokesman for the defense team, said that the insurers expect a victory in September, despite the setback in UnitedHealth Group Inc. v. Klay.  “We continue to prepare for our trial in Miami,” Jarrell said. “We are confident that the evidence will allow us to prevail in the case at trial.”

In 2000, physicians nationwide filed a racketeering suit against eight major health insurers, alleging that the companies developed software to automatically reduce the rates of reimbursement for doctors’ claims. The case was consolidated before Moreno.

In the suit, the physicians alleged that since 1990, the insurers conspired to cheat them by denying or manipulating claims to reduce or delay payments. The insurers allegedly developed automated claims processing systems that routinely exclude some covered patient services from payment.

Judge Moreno granted class action status to the doctors in 2002. The class includes more than 600,000 doctors. The defendants appealed, arguing that granting class certification would place overwhelming pressure on them to settle.

Two insurers — Aetna Inc. and Cigna Corp. — already have settled for a total of $310 million.

The insurers also argued that the uniqueness of each individual contract with the physicians would make a class action unmanageable.

Last year, the 11th U.S. Circuit Court of Appeals left the class certification intact on the claims of racketeering against the insurers. It threw out the class certification for other claims, including breach of contract.

In 2002, Moreno had granted an injunction against compelling the plaintiffs to arbitrate their claims. The insurers’ contracts with the doctors contained an arbitration clause, and the insurers had wanted to compel arbitration.

The appeals court reversed Moreno’s decision last July, ruling that while the physicians were not compelled to arbitrate the claims, the judge could not enjoin the parties from doing so. 

The 11th Circuit noted that the presence of claims that could be arbitrated under the physicians’ contracts and those that couldn’t be arbitrated were mixed up in the litigation, making an across-the-board decision on arbitration impossible.

Then the plaintiffs filed an amended complaint, clarifying the claims they said were not subject to arbitration under the contracts.

In November, the 11th Circuit ruled that the contracts between the physicians and the insurers did not require arbitration, since the claims were filed by nonparticipating providers.

The case is now in the expert discovery phase and the parties will go through nonbinding mediation before the trial, which is expected to last six weeks.

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