Patients can sue their health insurers under a federal anti-racketeering law, the U.S. Supreme Court ruled last week.
The high court's unanimous decision paves the way for enrollees of Humana Health Insurance of Nevada to pursue their class-action lawsuit against the plan. They claim Humana excluded them from hospital discounts it secretly negotiated.
The ruling also could subject the entire insurance industry to more scrutiny, said Eugene Anderson, an attorney with Anderson Kill & Olick in New York. "This decision is a very bright light in a large and lawless industry," said Anderson, who prepared a friend-of-the-court brief on behalf of United Policyholders, an advocacy group. "It's a very powerful remedy."
It's the second time this month the nation's highest court has increased the legal liability of the healthcare industry. In an earlier unanimous decision, the court lowered the legal standard for patients to claim damages in hospital "patient dumping" cases (Jan. 18, p. 6).
In this case, the group of 84,000 Humana enrollees sued in 1989 under the Racketeer Influenced and Corrupt Organizations Act, called RICO, which allows private parties to collect triple damages.
In the lawsuit, plan enrollees that in 1985 Humana started shifting costs to customers, whose policies required them to pay 20% of their healthcare expenses.
They claim that Humana secretly negotiated discounts with Humana Hospital Sunrise in Las Vegas, now called Columbia Sunrise Hospital and Medical Center, in which Humana's discount was applied only to the company's portion of the bill.
Humana argued successfully in federal district court that the McCarran-Ferguson Act, which makes states the primary regulators of the insurance business, prohibits the plan's enrollees from suing under RICO.
The 9th U.S. Court of Appeals in San Francisco reversed that decision in 1997, and Humana appealed to the U.S. Supreme Court.
The case will go back to the lower court for further action.
Humana said in a statement that it was disappointed.
"We certainly believed that the U.S. District Court ruled correctly in this matter," said Greg Donaldson, a Humana spokesman. "This decision in no way means that Humana committed any wrongdoing."
Donaldson said it was standard practice in the 1980s for patients to pay a percentage of their gross bill, not a percentage of the discounted charges negotiated by their health plans. Humana voluntarily ceased the practice in the early 1990s, he said.
The practice also led to dozens of consumer lawsuits against Blue Cross and Blue Shield plans across the country, many of which have been settled (Aug. 24, 1998, p. 22).
Nashville-based Columbia/HCA Healthcare Corp., which now owns Sunrise, is liable for 61% of any settlement reached in the case.
Separately, the U.S. Supreme Court let stand an appeals court ruling blocking lawsuits against insurers for decisions they make as government agents, such as when they process claims for Medicare or Medicaid.
The court declined to hear arguments in the case of a New York physician who sued Empire Blue Cross and Blue Shield, a Medicare fiscal intermediary. The physician said Empire mishandled his claims and improperly alerted authorities that they suspected his claims were false.