Cigna has agreed to pay $5.7 million to settle a so-called “ghost network” class-action lawsuit. The plaintiffs alleged that the insurer misled members with lists of in-network providers that turned out to be unreachable, out-of-network or non-existent.
A federal judge in the Northern District of Illinois gave preliminary approval of the settlement, which establishes a $5.7 million fund providing injunctive relief, class benefits, attorney fees and incentive awards. The agreement also prevents members from facing roughly $4.6 million in potential balance-billing exposure.
“There’s going to be many more ghost-network cases,” said attorney Steve Cohen, who represented the plaintiffs. ”The most important thing is the injunctive relief. These people are suffering. Insurers have got to get their act together.”
Cohen also is leading three similar ghost network cases against Elevance Health, Carelon Behavioral Health and Anthem Blue Cross.
Andrew and Andrea Hecht initiated the lawsuit in July 2024 on behalf of participants in Cigna-administered health plans. They contended that Cigna’s inaccurate provider directories violated the Employee Retirement Income Security Act by failing to uphold plan terms and breaching fiduciary duties. The Hechts cited personal harm, including a hospital bill they believed was covered in network but later was sent to collections after coverage was denied.
Last May, a district court judge dismissed claims seeking to recover benefits under ERISA, because of insufficient allegations of wrongful benefit withholding. However, the claim regarding breach of fiduciary duty was allowed to proceed because it sufficiently alleged harm resulting from inaccurate in-network information. After mediation with a retired judge in August, the parties reached a settlement in principle.
The law firm Arent Fox Schiff advised the health care industry to take away several lessons from the settlement:
- Even if a provider accurately reflects its contracting status internally, patients may rely on a plan’s directory to determine whether a provider is in network.
- If a provider is not accurately listed in a network directory, that provider will not realize the potential benefit of a directory listing leading to new patients or care.
- Directory errors also could lead to reimbursement disputes and unanticipated patient balance bills, as was the case here.
- Litigation or arbitration over conflicting network status records could tie up hundreds of individual accounts, delaying revenue to the provider and increasing costs.
“The Hecht class-action settlement underscores the litigation exposure that arises when provider directories are inaccurate or stale,” the law firm concluded. “While plan participants may be afforded some relief under federal law, providers may bear the brunt of disputes over underpaid claims arising from directory errors. For providers, a comprehensive, proactive directory verification and management strategy -- coupled with clear steps for resolution of any discrepancies -- remains the best defense against future ghost network claims.”
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