WASHINGTON — Lawyers saying they represent 32 million members of managed health care plans have launched the largest legal assault yet on HMOs, filing class-action lawsuits against five of the industry's biggest players.
The suits are expected to further pound the managed health care industry on Wall Street and add to its image problems--even though it is far from clear whether the lawsuits will result in substantial damage awards or even survive initial legal tests.
Alleging violations of federal laws governing health plans and of the Racketeer Influenced and Corrupt Organizations Act, the suits accuse California-based Pacificare Health Systems Inc. and Foundation Health Systems Inc. and three other companies--Cigna Healthcare, Prudential Health Care and Humana Inc.--of violating their responsibilities to their members.
The lawsuits were filed late Monday in federal court in Hattiesburg, Miss., by a consortium of lawyers led by Dick Scruggs. He was one of the chief architects of lawsuits filed by states against the tobacco industry, which led to $246 billion in settlements across the country.
The new lawsuits bring to at least nine the number of recent class-action suits alleging violations of federal law by managed health plans. In addition, class-action suits alleging violations of state consumer protection laws have been filed on behalf of HMO members, including one targeting Aetna/US Health Care of California.
"We're acting today to fix the broken promises the HMO industry has made to the people who entrust their very lives to these companies," Scruggs said.
The new lawsuits target the alleged practice of giving financial incentives, such as bonuses, to physicians for restricting patients' access to expensive procedures, treatments and tests. The lawyers said they are suing several firms because the practice of using such incentives is industrywide, and they are seeking a change in the way all health plans do business.
Most of the health plans charged in the lawsuits had not yet read the court filings and declined comment on the specifics. But several echoed the comments of Pacificare CEO Alan Hoops, who predicted the cases would result in higher costs for patients.
"This again appears to be one of many lawsuits that will ultimately drive up health care costs for consumers by forcing HMOs through unwarranted, costly and protracted litigation," Hoops said.
