Humana 2004 Annual Report Download - page 96

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The plaintiffs assert that we and other defendants improperly paid providers’ claims and “downcoded” their
claims by paying lesser amounts than they submitted. The complaint alleges, among other things, multiple
violations under the Racketeer Influenced and Corrupt Organizations Act, or RICO, as well as various breaches
of contract and violations of regulations governing the timeliness of claim payments. The complaint was
subsequently amended to add as plaintiffs several medical societies, including the Texas Medical Association,
the Medical Association of Georgia, the California Medical Association, the Florida Medical Association, and
the Louisiana State Medical Society, each of which purports to bring its action against specified defendants.
On September 26, 2002, the Court certified a global class consisting of all medical doctors who provided
services to any person insured by any defendant from August 4, 1990, to September 26, 2002. The class included
two subclasses. A national subclass consisted of medical doctors who provided services to any person insured by
a defendant when the doctor had a claim against such defendant and was not required to arbitrate that claim. A
California subclass consisted of medical doctors who provided services to any person insured in California by
any defendant when the doctor was not bound to arbitrate the claim.
On September 1, 2004, the Court of Appeals for the Eleventh Circuit (“Eleventh Circuit”) agreed with the
District Court’s ruling as to the class for the RICO claims, although it suggested that the class should be split so
that claims involving capitation and fee-for-service payments would be handled separately. However, it reversed
the lower court as to state law claims, including breach of contract, unjust enrichment and violations of prompt
pay laws. It found that the state claims were too individualized to be dealt with in a class action. The California
subclass was not specifically challenged and therefore was permitted to remain. On October 15, 2004, the
defendants filed a Petition for a Writ of Certiorari to the United States Supreme Court, asking for review of the
Eleventh Circuit’s decision. The petition was denied on January 10, 2005.
On December 9, 2004, the Court issued an order rescheduling the trial for September 6, 2005. On February
10, 2005, the Court ruled that the trial would be bifurcated so that the issue of liability would be tried first,
followed by proof of damages, if liability is found.
Meanwhile, on September 17, 2004, the plaintiffs filed an amended motion for class certification, seeking a
global fee-for-service class and five subclasses for the time period from January 1, 1996, to the date of
certification. The global class would consist of any medical doctor who provided service on a fee-for-service
basis to any person insured by Cigna Corporation or any other defendant for claims of RICO conspiracy and
aiding and abetting. The motion seeks subclasses for the conspiracy counts for capitation damages and capitation
injunctive relief consisting of all medical doctors who provided services on a capitated basis. The motion also
requests a subclass for a direct RICO claim consisting of medical doctors who provided services on a fee-for-
service basis to any person insured by Humana pursuant to a contract without an arbitration clause or without a
contract. The motion, which has not been ruled on, also seeks two California subclasses, one involving
physicians who provided services on a fee-for-service basis and the other for capitated physicians.
Two of the defendants, Aetna Inc. and Cigna Corporation, have entered into settlement agreements which
have been approved by the Court.
We intend to continue to defend this action vigorously.
Government Audits and Other Litigation and Proceedings
Insurance Industry Brokerage Practices Matters
We have responded to requests for information from the Departments of Insurance in the states of Ohio and
North Carolina with respect to an industry wide investigation into certain insurance brokerage practices,
including broker compensation arrangements, and bid quoting practices. In connection with this industry wide
review, we may receive requests for information or subpoenas from other regulators or attorneys general. We
intend to cooperate fully with any inquiries.
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