Health Net Inc. has agreed to pay $215 million and make $40 million worth of improvements in its business practices to settle three class action lawsuits that alleged the health insurer systematically underpaid two million customers in several states, including New Jersey.

U.S. Judge Faith Hochberg gave final approval to the settlement today, said Barry Epstein, one of the attorneys for the plaintiffs. Epstein said it was believed to be the largest single settlement ever reached in a health insurance class action suit.

“Health insurer settles lawsuits alleging it underpaid customers”, The Star Ledger (July 24, 2008)

The class action against Health Net, based upon claims of ERISA and RICO violations pertaining to out of network reimbursements, has formally ended. An agreement reached between the parties late last years has now been approved by district court judge Faith Hochberg. Health Net has agreed to pay $215 million, but denies any wrongdoing.

Health Net’s litigation troubles have been previously noted on this site, including the discovery battle discussed in :: District Court Judge Imposes Stiff Penalties on Health Net For Discovery Violations

According to a news release, the suits charged Health Net, Inc. with using a flawed database produced by Ingenix, a subsidiary of United Health Group, to improperly reimburse its members for insurance claims for out of network medical treatment. The news release can be viewed on the website of Wilentz, Goldman & Spitzer, P.A.

Note: The allegations regarding the Ingenix database received attention unrelated to the foregoing dispute here – :: New York Attorney General To Sue Ingenix & United Health Care Over “Rigged Data” and here -:: Week 2 Of Reimbursement “Data-Rigging” Accusations – Strike & Counterstrike

The issue has even broader ramifications as noted in :: PHCS Provider Reimbursement Controversy Affects ERISA Self-Funded Health Plans

When reimbursement assumptions are challenged, the thread that is pulled runs through more than just a swatch of the health care delivery system fabric. As I previously observed:

Effect On Self-Funded Plans

Other managed care companies use the Ingenix database and, in fact, Cuomo has issued 16 subpoenas to other large insurers pertaining to this issue. Most self-funded health plans use the Ingenix data, so they also stand to be affected by any adverse determinations as to the accuracy of the data.

Prospects For Resolution

The issues are sufficiently complex to sustain a long and expensive battle over the issue. Any statistical presentation of data involves assumptions, no matter how objective the methodology employed. Litigation over reasonable and customary charges is by no means a new phenomenon, and experience has shown that clear answers are hard to come by