Judge Orders UnitedHealthcare to Refund $4.4 Million in Overcharges

U.S. District Judge Ernest Torres ruled last week that UnitedHealthcare overcharged as many as 55,000 subscribers between 1993 and 1998 and that the insurer must refund them nearly $4.4 million, the Providence Journal reports. Torres determined that because of "undisclosed discounts" UnitedHealthcare gave to health care providers, the insurer's members in Rhode Island and Massachusetts were paying "more than the 20% copayment stipulated in their policies" for health services. In addition, in more than 5,000 of those cases, the subscriber's 20% copayment covered the entire cost of care. According to the class action suit filed in 1996, UnitedHealthcare would determine a "reasonable and customary" charge for a service and would require the patient to pay 20% of that fee. However, UnitedHealthcare would then negotiate a discount with the provider, reducing the actual price of the service. Thus, patients were paying 20% of the original charge rather than the discounted rate. UnitedHealthcare argued that it was "proper" to base the 20% copayment on the "reasonable and customary" charges and that it passed savings resulting from the negotiated discounts to subscribers in the form of lower premiums. Torres, however, disagreed, writing in his decision that by failing to disclose its discount negotiations, UnitedHealthcare had violated its contract terms with subscribers. "United cannot alter the manner in which the plans are reasonably understood and then (adopt) strained interpretations that are most favorable to it," Torres wrote. Torres, however, rejected a second allegation that UnitedHealthcare's actions resulted in a "breach in its fiduciary responsibility" to its members. "While the evidence shows that United never informed subscribers that the 'contract fees' paid to providers were less than the 'billed' amounts used to calculate copayments, that failure is not actionable," Torres wrote. As part of his decision, Torres gave plaintiffs' attorney Peter Wasylyk 30 days to propose a method of redistributing the nearly $4.4 million refund. In a statement released May 18, UnitedHealthcare officials said they had stopped using the "controversial" copayment calculation three years ago and were "evaluating [their] alternatives" in light of the decision. The Journal reports that a similar case against Blue Cross & Blue Shield of Rhode Island is pending in federal court (Mooney, Providence Journal, 5/19).