California Federal District Court Rules That AGG Clients’ Case Against Cigna for Institutional Practice of Under-Reimbursing Healthcare Claims Warrants a Trial on the Merits

U.S. District Court Judge David O. Carter ruled in favor of AGG’s clients on March 18, 2024, in a case involving “matters of widescale public concern” and a strong “public interest in access” to some of Cigna’s most coveted internal documents.¹ In the consolidated matter of TML Recovery, et al. v. Cigna Corp., et al., AGG’s clients are the plaintiffs, a collection of out-of-network substance use disorder treatment providers who treated over 500 patients with health insurance plans that were sold, insured, managed, or administered by Cigna. They sued Cigna Health and Life Insurance Company and Connecticut General Life Insurance Company for an institutional pattern and practice of under-reimbursing out-of-network claims for substance use disorder treatment in the midst of an opioid and mental health crisis that has been exacerbated by a global pandemic. They allege a violation of the Employee Retirement Income Security Act of 1974 (“ERISA”) and breach of the Cigna insurance contracts and promises made to the healthcare providers.

The TML Recovery matter was originally filed as individual suits in the California Superior Court for Orange County. The cases were removed to federal court and later consolidated. Cigna moved the court for summary judgment, contending they adjudicated the claims in accordance with the terms of their health plans and that the plaintiffs have no evidence that either the law or the plans required Cigna to pay more than they already have. Cigna also argued that the plaintiffs failed to obtain proper assignments from their patients, failed to comply with Cigna’s internal appeal procedures, and failed to file suit within time periods Cigna contends are mandated by the health plans. Cigna also asked the court to enter summary judgment on their counterclaims against the plaintiffs, in which Cigna seeks to recoup money they already paid to the plaintiffs. The plaintiffs asked the court to enter summary judgment as to Cigna’s counterclaims.

After multiple hearings on Cigna’s motions, which overlapped with the final pretrial conference and argument on motions to exclude evidence at trial, the court denied Cigna’s motion in a 40-page ruling that essentially aligned with each of the plaintiffs’ arguments, finding many disputed factual issues that warrant a trial on the merits.² The plaintiffs presented evidence that Cigna’s benefit decisions were arbitrary and capricious and driven by Cigna’s financial conflicts of interest, and that Cigna used inapplicable Medicare rates for different providers of different services to reimburse their out-of-network claims for substance use disorder treatment. The plaintiffs also presented evidence that they are proper assignees, they are not subject to Cigna’s internal appeal or limitations provisions in the plans, and that Cigna made promises to pay the plaintiffs’ claims during verification of benefits and prior authorization phone calls before they rendered treatment to the Cigna insureds. The court found this evidence sufficient to deny Cigna’s motion.

In litigation by healthcare providers as plaintiffs seeking recovery against health insurance companies, defeating a defense summary judgment motion is a victory in a critical battle over the outcome of the litigation. The plaintiff providers demonstrated not only that a trial is warranted to determine if Cigna breached the terms of its health plans by drastically under-reimbursing these claims, but also how Cigna’s benefit determinations are infected with a financial conflict of interest whereby Cigna takes a percentage of the difference between what healthcare providers charge and what Cigna ultimately pays. Through internal C-suite emails, memos, and agreements that Cigna fought hard to keep under wraps, the providers presented evidence that Cigna is placing profits over patient care. The court found that these internal documents were of such public interest that they were all unsealed and made available on the public docket. The court also granted the providers’ summary judgment motion as to two of Cigna’s three counterclaim causes of action, and the court denied all of Cigna’s motions to exclude evidence, guaranteeing a full trial on the merits with all evidence in play. This victory was truly a team effort by AGG Healthcare Litigation attorneys Rich Collins, Damon Eisenbrey, and Landen Benson. AGG Litigation partner Jennifer Shelfer and AGG Healthcare attorneys Tom Kelly and Nicole Wemhoff also provided tremendous support for briefing and trial preparation. Our team will now be preparing for an exciting trial that could have a dramatic impact on how healthcare claims are reimbursed.

For more information about this article, preparing assignment of benefit forms, payor/provider disputes, or healthcare reimbursement litigation in general, please contact Rich, Damon, or Landen.

[1] See, TML Recovery, et al. v. Cigna Corp., et al., United States District Court for the Central District of California, Case No. 8:20-cv-00269-DOC-JDE (TML Recovery), Order Granting in Part and Denying in Part Defendants’ Applications to Seal, etc., ECF No. 463, at 8.

[2] See, TML Recovery, Order Granting in Part and Denying in Part Parties’ Motions for Summary Judgment, ECF No. 486.