Class-action lawsuit accuses Cigna of cost-shifting scheme to divert administrative charges

Cigna was hit with a class-action lawsuit last week accusing the insurer of colluding with a claims administrator in a cost-shifting scheme to overcharge members.

Filed last week in the United States District Court Eastern District of Pennsylvania by a Macy’s employee who was insured by Cigna, the complaint alleged that the insurer “misappropriates millions of dollars every year” from members by diverting administrative costs from vendors.

The lawsuit also accused Cigna of falsifying Explanation of Benefits (EOB) forms to misrepresent charges from American Specialty Health, a company contracted by the insurer to process and administer healthcare claims and build provider networks, including chiropractors. Rather than paying for the administrative charges from ASH using plan fees and subscriber premiums, the complaint alleged Cigna disguises the charges as medical expenses. 

The class-action complaint claims the insurer violated the Employee Retirement Income Security Act of 1974 (ERISA), which sets minimum standards for health plans.

“By their uniform misrepresentations, Cigna and ASH are able to shift the cost for ASH’s charges from Cigna to Cigna’s members and ERISA Plans,” the complaint (PDF) reads. “Defendants deplete the members’ HRA and HSA funds and the assets of the plans to pay for these charges, rather than using them to pay for medical services.”

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The suit further argued that the scheme could mean Cigna is reporting inaccurate Medical Loss Ratios, used to calculate the percentage of premium income versus medical expenses. The Affordable Care Act established minimum MLR thresholds for individual and small-group markets as well as large-group markets.

A Cigna spokesperson said the insurer cannot comment on pending litigation. A spokesperson for American Specialty Health also declined to comment. 

The lawsuit comes on the heels of another class-action lawsuit, accusing Cigna of overcharging its members with artificially inflated drug costs. The insurer is looking to close a $67 billion deal to acquire Express Scripts, which has drawn scrutiny from lawmakers.