In the latest installments of a lingering battle between consumers and Blue Cross and Blue Shield plans nationwide over the sharing of the discounted rates paid to providers, several regional Blues plans have settled class-action lawsuits in recent weeks, and several others continue to battle similar suits.
Blues plans in Massachusetts and Vermont, along with Cleveland-based Medical Mutual of Ohio, which until last year was a Blues plan known as Blue Cross and Blue Shield of Ohio, this summer announced out-of-court settlements to resolve such lawsuits. Medical Mutual and the Massachusetts Blues agreed to pony up $16.4 million and $8 million, respectively, to reimburse policyholders represented in the class-action litigation.
In Medical Mutual's case, settlement negotiations had dragged on since August 1995, when a U.S. District Court judge in Toledo ruled against the company.
That dispute primarily involved about 350,000 enrollees who said they were overbilled on insurance copayments between 1988 and 1995.
The Blues plan in Maine settled a similar suit this spring.
"We denied our liability, (but) it was cheaper to settle than to fight it in court," said Carol Morris, a spokeswoman for Blue Cross and Blue Shield of Maine.
But elsewhere, plans including Empire Blue Cross and Blue Shield of New York, Utica-Watertown (N.Y.) Blue Cross and Blue Cross and Blue Shield of New Hampshire continue to fight similar lawsuits.
All of these legal battles are part of the aftermath of a spate of lawsuits filed in the early to mid-1990s alleging that Blues plans secretly negotiated discounts with providers but did not pass those discounts on to their enrollees when calculating their copayments for inpatient care.
As a result, the suits alleged, patients in the plans often paid full price for hospital services, even in cases where the health plan and employers benefited significantly from deep discounts.
Not surprisingly, though, many consumers rebelled once they discovered they were paying a larger percentage of the overall premium than they thought was fair.
The Blues plans typically maintained that they passed on the resulting savings to customers in the form of reduced premiums. In previous settlements, Blues plans in Arkansas, Louisiana, Mississippi, Missouri, New Mexico, Tennessee and elsewhere agreed to halt the practice and in many cases to reimburse consumers.
A number of other Blues plans have also settled, and lawsuits in Wisconsin, Rhode Island and Western Pennsylvania are pending, according to Wood Foster, an attorney with Siegel, Brill, Greupner, Duffy & Foster in Minneapolis, which has represented consumers in a number of these suits (See chart).
Officials at the national Blue Cross and Blue Shield Association declined to identify how many of its member plans have been sued or how many have settled.
Don Moran, a former Lewin Group consultant who recently launched his own consulting firm in Potomac, Md., said the payment pattern that evolved in the late 1980s and early 1990s "was more an accident of history" than a concerted conspiracy to defraud consumers.
Moran frequently consults with Blues plans, but he said none of his clients has been named in these suits over discounted rates.
In the ongoing New York case involving Empire Blue Cross and Blue Shield, Empire has named 145 hospitals in the state as third-party defendants, said Mark Thomas, general counsel for the Healthcare Association of New York State. Until recently, hospital rates were tightly regulated in New York, and Empire argues that it had no discretion in setting those rates.
If Empire is held liable, it wants the hospitals with which it contracted to be on the hook as well, Thomas said.
In most cases, though, consumers and their attorneys have come after health plans, not hospitals.
Plaintiffs' attorneys say copayments should have been reduced to reflect lower prices negotiated with providers and the overbillings in question could not have been accidental.
In virtually all cases where the lawsuits were settled out of court, Blues plans denied wrongdoing but promised to charge consumers according to the discounted formula. The Blues association, which represents 55 plans nationwide, downplays the suits as a historical footnote.
"It's not really an issue for many of our plans anymore. We really haven't seen much recently," said Laura Ryan, a spokeswoman for the Chicago-based organization.
About 25 such cases have come to light nationally, most of them in the early to mid-1990s, according to the Blues association. Some were settled, and others were dropped, Ryan said.
Association officials also stressed that non-Blues health plans, including Healthsource in New Hampshire, Physicians Health Plan of South Carolina and United Health Plans of New England, among others, attracted almost identical lawsuits in the mid-'90s.
Earlier this month, for example, Hooksett, N.H.-based Healthsource agreed to reimburse about 20,000 enrollees to resolve a 1996 class-action complaint, arguing that it would cost more to litigate than to settle. A court hearing is scheduled for Oct. 2.
In the most recent Blues settlement, Blue Cross and Blue Shield of Massachusetts announced last month that it would refund $8 million to approximately 60,000 policyholders in the state to settle a lawsuit brought by Health Care for All, a Boston-based consumer group.
That settlement, which is subject to approval by Suffolk Superior Court and the U.S. District Court in Boston, also included lawyers' fees of $1.3 million, a contribution of $175,000 to various charities and a $50,000 payment to the consumer group.
"We applaud the current management of Blue Cross and Blue Shield (of Massachusetts) for recognizing that prior practices were problematic and for working collaboratively with us to remedy them," said Rob Restuccia, executive director of Health Care for All.
Empire was named May 27 in a federal class-action suit filed in U.S. District Court of the Southern District of New York, after an earlier suit moved forward in the Second Circuit Court of Appeals against the Utica-Watertown plan.
The recent New York cases are complicated by the fact that the state regulated New York hospitals and payments to them from health plans until Jan. 1, 1997, under the New York Prospective Hospital Reimbursement Methodology.
"Empire paid in compliance with the law and at the direction of the state," said spokeswoman Deborah Bohren. Under New York law at the time, she said, not-for-profit health plans were paid based on discounted DRG rates but were told by the state health department to calculate copayments to hospitals by enrollees based on actual charges, not the discounted DRGs.
Officials at the New Hampshire Blues plan, meanwhile, vowed to defend themselves "all the way" against a suit they say is without merit.
"We have always disclosed those terms and have always shared the savings with our members," said Clark Dumont, a spokesman for the New Hampshire Blues.
The Massachusetts case involved payments by Blue Cross and Blue Shield enrollees who held traditional fee-for-service coverage. Any enrollees who were overbilled by $25 or more are eligible for the refunds.
A few days before the Massachusetts settlement, Blue Cross and Blue Shield of Vermont agreed to put aside nearly $450,000 to settle a similar suit by about 600 enrollees.
Proceeds from the suit, which covers 1993 through late 1995, will go to enrollees who were allegedly overbilled at least $50. Much of the settlement will go to lawyers and the Vermont Promise Fund, a private foundation that provides experimental medical treatments to residents with fatal diseases.
Cleveland-based Medical Mutual agreed in late June to settle three class-action suits over alleged overbilling by paying $16.4 million to affected policyholders.
Company officials characterized the proposed settlement as "fair and equitable" but declined to comment further until the agreement gains court approval.
As in many of these cases, the benefit to individual consumers is small, however. The average Medical Mutual policyholder's share of the pot is expected to be just $40.