A sign at Aetna's headquarters offices in Hartford, Connecticut. Credit: JHVEPhoto/Adobe Stock
Aetna and Optum have finalized a nearly $8.4 million settlement in a class-action lawsuit that has been litigated for almost a decade. The plaintiffs accused the two companies of using so-called “dummy codes” to mask administrative expenses in patients’ medical charges, which increased their out-of-pocket costs.
Under the settlement approved late last week by the Western District Court of North Carolina, Aetna will pay $4.6 million and Optum will pay $200,000 into a settlement fund covering patients and health plans. Aetna also agreed to pay nearly $3.6 million in attorneys’ fees.
The lawsuit was filed in 2015 by Sandra Peters, an Aetna retiree, after she saw significant increases in her out-of-pocket costs for chiropractic care and physical therapy. She alleged that Aetna and Optum had failed to uphold their fiduciary duties under the Employee Retirement Income Security Act. The class-action case later expanded to more than 250,000 members.
Aetna and Optum executives had agreed to add an extra service code to patients’ bills to cover administrative costs, company emails revealed. Aetna had directed Optum Health to submit codes so the contractor could be reimbursed for its services, according to court documents. However, Aetna contended that total costs were lower than they would have been if the insurer had not contracted with Optum.
Although a district court ruled in favor of Aetna and Optum in 2019, the 4th Circuit Court of Appeals overturned that decision two years later and sent it back to the lower court. The Supreme Court declined to hear the case in 2022. Last November, the parties agreed to a settlement that the court preliminarily approved in March. Coming to an agreement on terms and securing the judge’s final approval was the last step before the case could be closed.
“The use of dummy codes in health care billing is a deceptive practice that can have serious financial consequences for patients,” according to the EDGAR Index, a database system operated by the U.S. Securities and Exchange Commission. “By misrepresenting the services provided, health care companies can inflate the cost of care, leading to higher out-of-pocket expenses for consumers. This practice not only harms patients financially but also erodes trust in the health care system as a whole.”
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