Federal Judge Slaps Cigna for Unpaid Claims

HOUSTON (CN) — Cigna owes a Houston-area hospital $13 million for almost 600 unpaid claims, a federal judge ruled, in a case that began when Cigna accused the hospital of overbilling it.

Cigna and its predecessor/affiliate Connecticut General Life sued Humble Surgical Hospital in November 2013, accusing it of overbilling them for out-of-network medical services.

But on June 1, U.S. District Judge Kenneth Hoyt found that Cigna had subverted the plan administrator's role for its own benefit by imposing a method of claims processing that was not part of its plan and was designed to deny the hospital's claims.

He dismissed Cigna's claims with prejudice.

"Indeed," Hoyt wrote, "Cigna's unprecedented claims processing methodology and incessant related acts were extraordinary acts of bad faith."

Cigna demanded $5 million in its original complaint. It claimed that Humble Surgical had been overbilling it since 2010 by charging it more than its share under the benefits plans, but changing patients only "nominal amounts," or nothing at all. It sought recovery under ERISA and Texas law.

Humble Surgical countersued, claiming Cigna improperly denied its claims and did not timely provide it with necessary plan documents.

Hoyt found that Cigna's claims fail as a matter of law. In its ERISA claims, it claimed that its plan allowed it to recover overpayments through a lien created at the time of the overpayment.

But nothing in the "Recovery of Overpayment" section of the plans mentioned creating a lien. When asked about the overpayment provision, Michael Battistoni, Cigna's fact witness and nonretained industry expert, replied: "No, there is no verbiage about liening," according to Hoyt's 54-page ruling.

Nor could Cigna not identify any specific overpayments. In fact, Humble Surgical showed that Cigna had not paid it anything since 2014.

"In this case," Hoyt wrote, "Cigna made only a bare assertion that the overpayments it seeks, which were purportedly made between 2010 and 2014, are still within Humble's possession and identifiable from Humble's general assets."

Hoyt found that Cigna inappropriately applied exclusionary language to deny covered services.

"Cigna's method for processing Humble's claims was simply disingenuous and arbitrary," Hoyt wrote. "It was focused more on accomplishing a predetermined purpose: denying Humble's claims."

Hoyt found that Cigna owes Humble Surgical $11 million in unpaid claims, and because it stepped out of its role as a third-party claims administrator by rejecting the hospital's proper claims and denying the hospital important plan documents, it owes another $2 million in penalties ERISA.

"In essence," Hoyt found, "Cigna 'hijacked' the plan administrator's role and subverted it for its personal benefit."

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit