Managed Care - February 2009 - (Page 20) ers are at fault because the cost of defending them “I do think that some plans, particularly the has grown quickly since business information smaller plans, are vulnerable to go under if they susbegan to be saved on computers rather than in tain a significant class action or a possible regulamanila file folders. Legal fees have gone through the tory type of suit,” says Angie Brozny, vice president roof at least since 2006, when federal courts created of Evergreen Re, a company that represents several rules on electronic discovery. Those rules have been companies that sell insurance coverage to more picked up in at least state 20 states, reports an exthan 100 MCOs. “I also think that with the econpert on this topic, Martha Dawson, JD, of Seattle. omy, the big players are possibly vulnerable as well, “In a typical case before electronic discovery, but their scale may protect them.” maybe document production would cost in the Health Net’s Tiano does not fully agree. “If you thousands of dollars. Now it can easily be in the didn’t have the current economic environment, hundreds of thousands of dollars,” Ziegler says. they [lawsuits] would be easier to withstand,” she “Primarily because of e-mails, you are looking at says. a million or two million documents. It’s expensive No matter the size of the plan, all are at high risk to review documents and redact them for privileged for class action lawsuits, Ziegler says. information and determine what is relevant.” “It’s scarier for a little company. You get one of According to the 2006 One Beacon study, before these and you have to spend maybe $3 million de2000, 76 percent of dollars paid out by fending a case,” Ziegler adds. insurers were for indemnity losses Subscriber suits still exist, but they and 22 percent were for legal fees. are not the emotionally-charged, waSince then, 76 percent are for legal tershed utilization review cases exfees and 21 percent are for indemnity emplified in Fox v. Health Net, where claims. a jury awarded $77 million in punitive Though plans have tried to hold damages besides more than $12 mildown litigation expenses by enforcing lion in compensatory damages for binding arbitration clauses in proHealth Net’s refusal to pay for an invider contracts, they have not been novative cancer treatment the insurer wholly successful. “Plaintiff attorneys claimed was experimental. Those argue provider contracts are contracts suits have been lessened by wideof adhesion where a provider had no spread adoption by states of externalchoice but to sign and was not able to review statutes that provide plan “If you didn’t have the current negotiate, so arbitration clauses are economic climate, [lawsuits] members with an independent apoften not enforced,” says William would be easier to withstand,” peal process in the event that they are O’Neill, JD, a lawyer at the McDonald says Linda Tiano, a senior vice turned down by an MCO. president and general counsel at Hopkins law firm in Cleveland. “Third-party review has made the Health Net. Plans have not been able to fend off process more independent, more fair, many of the suits because there’s not and has resolved a lot of the issues,” a lot of sympathy for them, Ziegler says. says Health Net’s Tiano. Linda Tiano, Health Net senior vice president and general counsel, adds: “For better or worse, Uncharted waters this industry is viewed so badly that people will sue Both defense and plaintiff lawyers agree that over pretty much anything. The perception of more mega-provider suits are coming as new legal health insurers is so negative that jurors are willing theories are advanced. “Before the last 10 years, the to think the worst.” idea that providers would sue health insurers they The suits may threaten carrier viability. “There dealt with regularly was foreign,” says Joel are only so many $100 million settlements a comMichaels, JD, who represents health plans in propany can sustain,” Ziegler says. It is especially true vider disputes. for small regional health plans, to the point that the “I think we will see many more class action suits suits are no longer simply the cost of doing business mainly because it has been discovered as a vehicle against which the plans can insure. for bringing these kinds of claims.” MC 20 MANAGED CARE / FEBRUARY 2009
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