By: Jon Braunstein and Mark Casciari

In May 2013, CIGNA sued La Peer Surgery Center LLC of Beverly Hills, an out of network surgical provider, alleging that La Peer overbilled hundreds of ERISA health benefit plans administered by CIGNA. CIGNA alleged that La Peer manipulated the plans’ out-of-network rules in order to increase reimbursements.  La Peer waived patient deductibles, coinsurance and other cost-sharing plan terms, CIGNA alleged, and then billed the plan at high rates.  For example, CIGNA alleged that La Peer billed approximately $14,000 for a colonoscopy or $16,000 for an endoscopy, procedures that cost roughly $650 at an in-network surgical center.  CIGNA claimed that the plans were defrauded of millions of dollars. 

La Peer moved to dismiss, arguing, among other things, that CIGNA lacked standing to sue.  La Peer argued that CIGNA merely administers claims under the plans, and any alleged overpayments came not from CIGNA, but rather from the plans that CIGNA administers. 

CIGNA argued that it had standing as an ERISA fiduciary, a term that includes anyone who exercises discretionary authority over the plan’s management or authority over the management of its assets, and anyone having discretionary authority or responsibility in the plan’s administration.   

On March 12, 2014, U.S. District Judge Christina Snyder in Los Angeles dismissed the lawsuit. 

Judge Snyder agreed with CIGNA that ERISA fiduciaries have standing to assert claims on behalf of the plans they administer, but found that CIGNA failed to allege the identify any of the plans (instead alleging only that it represented “certain employee health benefit plans”), Judge Snyder determined that the plans are the real parties in interest, and that they are effectively proceeding as anonymous plaintiffs, which “runs afoul of the public’s common law right of access to judicial proceedings.”

This decision stands for the proposition that ERISA plan administrators who sue on behalf of the plans they administer must disclose the identity of those plans. The decision is important to note because fraudulent health care claims have been estimated at 80 billion dollars per year. See FBI-Health Care Fraud.

We can expect to see many more lawsuits against providers who overcharge ERISA health plans.  ERISA plans should not be shy about disclosing their identities even if they would prefer to remain anonymous victims of fraud.