A Cautionary Tail of Head-in-the-Sand TPA Practices

On Oct. 29, 2015, in southern district of Texas Federal Court, a TPA administered self-insured ERISA plan and plan sponsor were sued for alleged ERISA plan assets embezzlements, deceptively concealed with alleged “fake PPO (CO) discounts” and “fee forgiveness protocol scam”

Cigna Administered ERISA Plan Sued for Embezzlement in Out Of Network Medical Claims Disputes-Cautionary Tale for All Self-Insured Health Plan Administrators

This bellwether lawsuit in ERISA healthcare claims disputes presents a cautionary tale for all self-insured plan administrators with “Head in the Sand” TPA monitoring practices. Cigna administered self-insured ERISA plan, CB&I and its Plan Administrator, Dennis Fox, were sued for alleged ERISA plan assets embezzlement, deceptively concealed through “fake PPO (CO) discounts” and Cigna’s “fee forgiveness protocol scam”.

On Oct. 29, 2015, in southern district of Texas Federal Court, a Cigna administered self-insured ERISA plan, CB&I and its Plan Administrator, Dennis Fox, were sued by an out-of-network (OON) surgical center, True View Surgery Center One, for alleged ERISA plan assets embezzlements, deceptively concealed with alleged “fake PPO (CO) discounts” and “fee forgiveness protocol scam”. This innovative and cutting edge ERISA health Plan lawsuit, by an OON healthcare provider for alleged plan assets embezzlement by the ERISA plan’s third party claim administrator (TPA), was filed just eight (8) days after a different self-insured plan filing on a similar lawsuit, (FAC on Oct. 21, 2015), against the plan’s TPA for allegedly similar plan assets conversion with respect to OON claims administration between the ERISA plan and TPA.

According to the court documents:

“Under this backdrop, together Defendants and Cigna concocted an intricate scheme to transfer and embezzle plan funds. Transfers are first concealed by processing out-of-network claims under a fabricated Preferred Provider Organization (PPO) “contractual obligation,” even though Defendants and Cigna are fully aware that no such contract exists. Then, Defendants and Cigna knowingly implemented a system to willfully and wrongfully refuse payments to the out-of-network provider under a sham “fee-forgiveness” protocol.”

In pursuance of this signpost lawsuit, Avym Corp. announces a new division of its ERISA litigation support and/or prevention program, in order to:

  1. Closely track this type of unprecedented but most dramatic emerging trend in ERISA healthcare litigation in today’s evolving managed care market including:
    • Analyze new litigation allegations of plan assets embezzlement to be made by plan sponsors and plan administrators, healthcare providers and federal regulatory and enforcement agencies against TPAs;
    • Understand managed care TPA litigation defense strategies and trial evidence;
    • Decipher court decisions and alternative resolutions to this new trend in the alleged conflict in ERISA prohibited transaction against health plan TPA’s for managed care costs containment and savings tactics;
  2. Demystify these new lawsuits and the implications to plan sponsors and providers, specifically, how the lawsuit will ultimately impact all out-of-network claim disputes.

It is standard industry practice for self-insured health plans to engage in out of network “cost containment” or third party “repricing agreements” with out of network providers, in an effort to lower costs or save money. However, plaintiff’s allegations shed light on possible abuses that take place disguised as legitimate practices. TPA’s tactics of applying non-existent or “fake” PPO discounts are very familiar to all out-of-network medical providers. According to court documents:

“The self-dealing embezzlement scheme perpetrated by Cigna and Defendants is even more repugnant because Cigna duplicitously demands proof from the provider that it collected the patient’s co-insurance and deductibles in full when it explicitly instructed the provider not to bill the patient.”

Over the past 5 years, Avym has closely followed the decisions from the Supreme Court and federal appeals courts on ERISA prohibited self-dealing against ERISA plan TPA’s for managed care savings. These new ERISA embezzlement cases are just the initial impact of the court’s Hi-Lex decisions. This lawsuit in particular should serve as a warning and wake up call for all Plan Administrators to continually monitor their TPAs in accordance with the Plan Administrator’s statutory fiduciary duties and to discharge its duties with respect to a plan solely in the interest of the participants for the exclusive purpose of providing benefits to them.

The Court Case info: True View Surgery Center One L.P., v.Chicago Bridge And Iron Medical Plan, Chicago Bridge And Iron Company, And Dennis Fox, Case #: 3:15-CV-00310, filed on Oct. 29, 2015, in the United States District Court For The Southern District of Texas.

In the Oct 29, 2015  lawsuit filed by OON provider True View Surgery Center, against the Cigna administered ERISA plan, the Plaintiff alleged in part:

“Specifically, in spite of the glaring conflict of interest and inherent breach of fiduciary duties, Defendants agreed to an unlawful compensation structure that financially rewards Cigna for wrongfully denying and underpaying benefits claims. Under this backdrop, together Defendants and Cigna concocted an intricate scheme to transfer and embezzle plan funds. Transfers are first concealed by processing out-of-network claims under a fabricated Preferred Provider Organization (PPO) “contractual obligation,” even though Defendants and Cigna are fully aware that no such contract exists. Then, Defendants and Cigna knowingly implemented a system to willfully and wrongfully refuse payments to the out-of-network provider under a sham “fee-forgiveness” protocol. As a result of the wrongful claims denials, the transferred plan funds are ultimately misappropriated by Cigna, who then fraudulently pays itself with the plan funds, falsely declaring the embezzled funds as compensation generated through managed care and out-of-network cost containment “savings,” when in truth the claims were never paid and the plan beneficiaries were left exposed to personal liability for their unpaid medical bills.”

On Oct 21, 2015, in a separate but similar lawsuit filed by an ERISA plan against a separate ERISA plan TPA, the Plaintiff alleged in part:

“MagnaCare represented to Plaintiffs in a written contract between the parties that providers of diagnostic laboratory and ancillary services had “accepted” a “fee schedule” which included a “management fee” for MagnaCare. In fact, the providers had never “accepted’ a fee schedule containing a “management foe” for MagnaCare. Rather, the providers had agreed to a fee schedule, which was a fraction of the amounts collected by MagnaCare from Plaintiffs. MagnaCare – without disclosure to Plaintiffs or the providers – simply misappropriated the difference between what Plaintiffs paid MagnaCare and what MagnaCare negotiated to pay the providers.” 

Court case info: UNITED TEAMSTER FUND, et al v. Magnacare Administrative Services, LLC et al, Case 1:13-CV-06062-WHP-FM, First Amended Complaint (FAC), filed on Oct. 29, 2015, original Complaint, filed on august 27, 2013,  in United States District Court Southern District Of New York.

These lawsuits come on the heels of the Oct. 20, 2014 U.S. Supreme Court decision todeny all appeals on a BCBSM’s $6.1 million fraud judgment for a self-insured ERISA plan by the U.S. Court of Appeals for the Six Circuit, upholding the decision by the District Court for the Eastern District of Michigan.

On May 14, 2014, a federal appeals court (Sixth Cir. 2014) upheld the district court’s $6.1 million decision for Hi-Lex, a self-insured ERISA plan against BCBSM for violating ERISA in prohibited transactions and fiduciary fraud, according to the court documents.

Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Michigan, ((SC Case #. 14-168, 6th Cir. Case #: 13-1773, 13-1859).

For over 6 years, Avym Corp. has advocated for ERISA plan assets audit and embezzlement recovery education and consulting. Now with the Supreme Court’s guidance on ERISA anti-fraud protection, we are ready to assist all self-insured plans recover billions of dollars on behalf of hard-working Americans. To find out more about Avym Corporation’s Fiduciary Overpayment Recovery Specialist (FOR) and Fiduciary Overpayment Recovery Contractor (FORC) programs click here.

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