Humana class action may change HMO coverage

Conclusion: The class action suit against Humana will probably be certified. The complaint will survive Humana’s motion to dismiss and probably a motion for summary judgment.

Discussion: Humana promised to make coverage decisions based on “medical necessity” as that term is defined in its plan.  The suit alleges that Humana made coverage decisions based on cost in spite of medical necessity and gave financial incentives to claim reviewers to deny claims that satisfied Humana’s own definition of medical necessity.  Humana’s failure to make coverage decisions based on medical necessity is the basis for a breach of disclosure claim under ERISA and a fraud claim under RICO.

The suit seeks “corrective disclosures” in Humana’s health plan documents to inform members about how coverage decisions are made.  The RICO count seeks recovery of the amounts Humana was “unjustly enriched” by its cost based decision making.  Because the complaint avoids personal injury claims and seeks to “correct’ the plan, class certification will be hard to oppose.  Moreover, since the failure to disclose how coverage decisions are made is alleged as a breach of the fiduciary duty owed plan members under ERISA, the complaint avoids the preemption doctrine.

In other words, the plaintiffs are suing under ERISA so preemption of state law by Federal law is not placed in issue.  In short, this suit is couched as a public service suit protecting the class by requiring Humana to disclose how it makes coverage decisions.  The suit then alleges RICO claims which, if sustained, would subject Humana to unjust enrichment.

Despite the RICO claim for unjust enrichment, the Humana complaint seeks to avoid a direct challenge to the HMO economic model. What the suit seeks is that Humana comply with the terms of its own documents. If the plaintiffs are successful, Humana will be forced to make coverage decisions based on medical necessity.  If Humana decides that medical necessity must include cost considerations, the suit will force Humana to disclose it.

Ultimately, this case may forge a new principle in health care law: cost may be considered in coverage decisions but only if it is disclosed.  A collateral rule is also likely: cost may be considered but only if it does not compromise the quality of care.  This would be revolutionary.