Blue Cross & Blue Shield of Rhode Island has settled two class-action lawsuits for $17.5 million in connection with claims processing practices that allegedly reduced subscribers’ benefits and increased their out-of-pocket expenses for several years.
In the settlement, Blue Cross does not admit fault, but does accept a permanent ban on those practices, which “are no longer in place,” according to a company news release.
UnitedHealthcare of New England settled a smaller, but similar case in 2002 for $4.4 million.
Blue Cross explained its settlement as a way to “avoid the cost and uncertainties of trial and possible appeals,” and to expedite payments to the affected people. Blue Cross also said it does not expect this to affect its reserves or increase rates or premiums.
The bulk of the payout, to be administered by plaintiffs’ lawyer Peter N. Wasylyk (a Providence legislator), will go to an estimated 115,000 former and current subscribers, who will get $10 to $2,500, or an average of about $95 each.
Blue Cross, the state’s leading health insurer for 66 years, now covers more than 680,000 people.
Court hearings are scheduled for Wednesday to finalize the settlement. Then Wasylyk’s office will begin the process of locating and contacting all the people eligible for payment. Each will get a letter, and there will also be ads in the local press, a Web site and a toll-free number.
“Hopefully by summertime, the disbursements will occur,” Wasylyk said. “But what’s great about this settlement is that the class members will receive the payment without a cumbersome claims process” – they’ll just get the checks automatically.
About $6.5 million will go to attorneys’ fees and to cover all the costs of the process, Wasylyk said. Also included in that amount are $25,000 “incentive awards” for the five named plaintiffs in the case, and smaller awards for three former plaintiffs, Wasylyk said.
The lawsuits go back to 1996. Wasylyk filed one in U.S. District Court, Providence, on behalf of plaintiffs covered under a federal law known as ERISA, and another in state Superior Court on behalf of plaintiffs who weren’t covered by ERISA because they paid for their own health insurance or were government employees.
The suits were part of a national wave of consumer litigation against insurers. This settlement, Wasylyk said, is one of the largest against a Blue Cross entity, the fact that it bars the practices involved “further shows the effectiveness of class actions as a consumer protection tool.”
Limitations on class-action suits are part of President Bush’s new “tort reform” agenda.
Blue Cross fought to keep Wasylyk’s suits from being certified as class actions, but both the federal and state judges involved found that, as Wasylyk alleged, what had happened to his clients wasn’t unique, but the result of practices affecting thousands of similar subscribers.
The state court certified four classes of plaintiffs, based on the alleged practice involved:
– Classic Blue subscribers who used a “participating provider” in Blue Cross’ network, but were reimbursed the much-lower amount they would’ve gotten outside the network.
– Classic Blue subscribers whose claims were processed only under the covered-services or the major-medical parts of their plan, but not both, and thus did not get their full benefits.
– Classic Blue subscribers who paid for major medical services but were only credited on their deductible for the lower rate Blue Cross would’ve paid, not what they actually paid – so they had to wait longer and pay more before their coverage kicked in.
– HealthMate, HealthMate 2000, and SCRIP plan subscribers who had a percentage co-payment, and had to pay that percentage on the retail or billed amount, rather than on Blue Cross’ lower negotiated rate.
Because some plaintiffs were withdrawn from the federal case, only the latter class was certified in U.S. District Court. In July 2003, both cases were consolidated, and since then, the courts have been working together to reach a resolution.
In the settlement, the claims have been weighted, Wasylyk said, so while about 65,000 people will get 100 percent of the money they overpaid, others – for example, people who overpaid for some prescriptions – will get a reduced amount.
Marti Rosenberg, executive director of Ocean State Action, an advocacy group that often clashes with insurance companies, hailed the settlement as a victory for consumers.
“This is essentially one in 10 Rhode Islanders who were affected, and the best thing is that the practices have stopped,” Rosenberg said.
