Health Net Settles on Improper Reimbursement Charges

July 25, 2008 ( - Health Net has agreed to a $255-million settlement of a lawsuit claiming it improperly reimbursed members for out-of-network charges.

Business Insurance reports that, under terms of the settlement, Health Net will pay $215 million to more than two million participants in its health insurance plans and will make business practice changes expected to cost $40 million. A spokesman for plaintiffs’ attorneys said several self-insured employers are among those who will benefit from the settlement, though not identified as class members, according to Business Insurance.

The suit, Wachtel vs. Health Net Inc., charged the insurer with violations of the Employee Retirement Income Security Act (ERISA), New Jersey’s employer health plan law, and the U.S. Racketeer Influenced and Corrupt Organizations Act for allegedly systemically underpaying plan members. The lawsuit alleged the insurer has been improperly reimbursing plan members for out-of-network medical claims since 1997 by using the Prevailing Healthcare Charges System produced by Ingenix, a subsidiary of UnitedHealth Group.

Health Net admitted no liability in the settlement agreement, Business Insurance said.

Aetna , which also used databases owned and operated by Ingenix faced a similar suit in 2007 (See Aetna Accused of Reducing Out-of-Network Benefits ).