'Let them wither': Cigna's multi-million dollar battle over lab billings
Three labs first sued Cigna, alleging $32 million in unpaid claims. But a countersuit accuses the labs of fraudulent billing.
Lawyers in Hartford, Connecticut, the insurance capital of the country, are watching as both sides dig in their heels in a multimillion-dollar legal battle involving Cigna Health and Life Insurance Co. and several of its laboratory providers.
Cigna is claiming fraudulent billing. But the labs say Cigna has made these claims in the past as part of a pattern of behavior, something the insurer denies.
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The case “will be of interest to attorneys, especially in Connecticut, because there are some interesting procedural issues at play, some interesting substantive issues and a lot of money at stake,” said Scott Hare, a partner with Whiteford Taylor & Preston in Pittsburgh, Pennsylvania, and the lead counsel for the lab providers. “It’s a case to follow—to the extent we are successful—because this will be a recovery of payment under state statute. The broader notion of obligations under the scope of ERISA is an interesting topic for folks in the insurance world.”
ERISA, the Employee Retirement Income Security Act, is the federal statute governing worker benefit plans.
Three labs first sued Cigna and its corporate affiliate, Connecticut General Life Insurance Co., claiming the insurers owed about $32 million in unpaid claims. But the insurance companies countersued, accusing the labs of fraudulent billing.
The three plaintiffs are Epic References Labs Inc., Biohealth Laboratories Inc. and PB Laboratories LLC.
Cigna countersued them and three others—Epinex Diagnostics Inc., NJ Reference Laboratories Inc. and Althea Laboratories Inc.—for $17 million.
The labs won a huge victory in the U.S. District Court for the District of Connecticut, which dismissed all of Cigna’s counts.
Cigna then appealed.
The U.S. Court of Appeals for the Second Circuit dismissed most of the insurers’ claims, but three survived: equitable claims of unjust enrichment, unjust enrichment under ERISA, and declaratory judgment on the ground of laches, or the delay of a case.
Then on April 2, the labs filed a post-remand brief in further support of their motion to dismiss all counts.
The brief states that alleging fraudulent billing “is a deliberate and repeated strategic maneuver. Nearly one week before Cigna filed this suit, [it] filed a nearly identical suit in this court against New Method Wellness, Inc.” alleging fraud.
In an interview, Hare, who represents the six labs, three of which claim they are owed $32 million for medical care and lab testing, say attorneys following insurance law will be paying close attention to this ongoing legal saga.
Hare said he’s confident the remaining counts Cigna alleges will be dismissed and that his clients will receive the money owed them.
“These labs did this work and over the years, Cigna paid the labs $37 million. To pay that much is a pretty compelling indication the labs were doing their job. They were owed that and the money was paid,” Hare said.
For its part, Cigna alleges fee forgiveness on the part of the laboratories in legal filings, meaning the laboratories waved co-pays for patients that they shouldn’t have.
Cigna’s attorney, Alston & Bird Washington, D.C., partner Edward Kang, didn’t respond to a request for comment Wednesday.
Meanwhile, Hare refuted the insurers’ argument.
“We say they are wrong with regard to their fee forgiveness claim,” he said. “We have an obligation to make reasonable efforts to collect co-pays and we went beyond the industry standard in doing so.”
Hare said his clients are open to a settlement, but are ready to go to trial.
“I’d close with telling the jury that the moral here is to live up to your word,” he said. “Here is one of the biggest insurance companies who pays our clients for work, until it decides not to, and then they cut them off and let them wither.”
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