UnitedHealth Group Inc., Health Net and other insurers Monday lost their U.S. Supreme Court bid to stop a class-action lawsuit that says 600,000 doctors were underpaid for treating patients.
The justices refused to hear an appeal filed by six health insurers that the insurers had hoped would derail the case by stripping its class-action status. The insurers said a federal appeals court was wrong to uphold a trial judge's ruling and let the suit go forward as a class action.
Billions of dollars may be at stake as the case returns to a federal district court in Miami, where a trial is scheduled to start in September.
Class-action status "places heavy pressure" on the companies to settle "rather than roll the dice and possibly incur potentially crippling, even bankrupting damages awards," said the Blue Cross and BlueShield Association, which said it faces two similar health care provider lawsuits that may be affected by the legal precedent.
Insurers had predicted that the physicians would not be able to protect their class-action status. But with the Supreme Court's rebuff, "this is the final nail in that coffin in that argument," said Archie Lamb, co-lead counsel for the doctors.
The racketeering lawsuit also names units of Humana, PacifiCare, Prudential Financial Inc. and WellPoint Inc. - the company formed by the merger of Anthem Inc. and WellPoint Health Networks.
Aetna Inc. and CIGNA Corp. already settled class-action litigation with physicians that had been pending for several years.
In a settlement announced in May 2003, Aetna agreed to pay $170 million - $100 million of that to doctors, $20 million to a new nonprofit foundation and as much as $50 million in plaintiffs' legal fees.
CIGNA, in a settlement announced in September 2003, agreed to pay at least $70 million to physicians, $15 million to a health care-related foundation, and as much as $55 million in plaintiff attorneys' fees.
The physicians' suit that is still on track accuses insurers of developing processing software that automatically "downcodes" claims to reduce the reimbursement rate.
Lawyers for the doctors say they intend to seek billions of dollars in damages for claims that date from 1990.
"We remain confident of prevailing because of the evidence we will present at trial," said Kent Jarrell, a spokesman for the insurance companies in the litigation.
Discovery and depositions are underway in the case.
In their appeal, the companies contended that the trial judge and the Atlanta-based 11th U.S. Circuit Court of Appeals, in letting the suit proceed as a class action, did not question the allegations in the doctors' complaint. The insurers said the lower courts ignored evidence that the individual contracts doctors signed varied so much that a class action was not practicable.
"The court of appeals glossed over the individual differences affecting claims and defenses with respect to each putative class member," the appeal argued.
The doctors, led by Leonard J. Klay, argued that the trial judge overseeing the case looked at the insurers' evidence and rejected it.
The 11th Circuit said a class action would be the most efficient way to resolve the racketeering claims. "It is ridiculous to expect 600,000 doctors across the nation to repeatedly prove these complicated and overwhelming facts," the three-judge panel said.
The appeals court ruling was only a partial victory for the doctors. The panel said other arguments, including breach of contract and California state-law allegations, weren't suitable for resolution as a class action.