The American Dental Association has taken another step in its battle against unfair dentist reimbursement practices and interference by insurers in the doctor-patient relationship. As was reported in the ADA News and in the national media, the ADA has sued Wellpoint Health Networks Inc.1
This represents the second time in less than a year that the ADA has issued a legal challenge to insurer practices that have harmed ADA member dentists and their patients. The Wellpoint lawsuit follows up on a similar complaint filed in August 2001 by the ADA against Aetna Inc.2 Both of these lawsuits were filed in the U.S. District Court for the Northern District of Illinois.
The ADA and the dentist plaintiffs are seeking injunctions to stop Wellpoint from paying less than out-of-network dentists’ actual charges.
In the Wellpoint case, the ADA and three of its member dentists have filed a class action lawsuit, charging that Wellpoint has failed to pay the amounts out-of-network dentists are entitled to receive for treating patients who are Wellpoint subscribers.
The ADA has filed suit on its own behalf and on behalf of its members. The dentist plaintiffs are Dr. Frank S. Arnold of Covington, Ga.; Dr. David W. Richards of San Diego, Calif.; and Dr. James Swanson of Palos Heights, Ill., who also is a plaintiff in the Aetna case. These three dentists are "out-of-network" providers who provide services to patients covered under group dental benefit plans administered or insured by Wellpoint.
The dentist plaintiffs also are suing on behalf of all out-of-network dental providers who were paid less than their actual charges by Wellpoint in the past six years. The defendants in the suit include Wellpoint Health Networks Inc. and Blue Cross of California, a wholly owned subsidiary of Wellpoint.
According to subscriber agreements, which contain standard language concerning payment for services provided by out-of-network dentists, Wellpoint must pay its subscribers or their out-of-network providers the actual amount those dentists charge for their services, assuming the annual deductible is met, and minus any copayment paid by the subscriber. The only circumstances under which Wellpoint would not be obligated to pay the dentists’ actual charges would arise if Well-point could demonstrate, using valid data, that the actual charge by the treating dentist "exceeds the customary and reasonable allowance" for the particular procedure in question. The ADA’s complaint points out that the term "customary and reasonable allowance" typically is referred to as "usual, customary and reasonable," or "UCR."
In the lawsuit, the ADA maintains that in cases where Wellpoint has paid a UCR amount rather than a dentist’s actual charges, "Wellpoint does not possess and has failed to come forward with valid data substantiating payment of the UCR amount."1 Thus, under the terms of the subscriber agreements, Wellpoint is required to pay the actual charges of the out-of-network dentists.
As the lawsuit demonstrates, Wellpoint has been paying far less than out-of-network dentists’ actual charges. For example, in August 2000, Dr. Richards billed his usual fee of $200 for a periodontal scaling and root planing in one quadrant of a patient’s mouth. However, Wellpoint reported that the UCR fee for this procedure was only $146 and paid a percentage of that reduced amount, as provided under the subscriber’s contract. During that same month, Dr. Richards performed an extraction of a single tooth, charging the patient his usual fee of $125. Wellpoint concluded that this fee exceeded the "customary and reasonable allowance" by $30, and paid Dr. Richards the applicable reduced amount. The lawsuit states that Dr. Richards’ experiences are just one example of "a consistent pattern in which Wellpoint underreimburses its subscribers and their out-of-network dentists based on its UCR determinations."1
The Wellpoint case differs from the Aetna lawsuit in that one of the dentist plaintiffs in this case attempted to use Well-point’s administrative procedures to challenge his reduced reimbursement. In his appeal of Wellpoint’s reduction of reimbursements based on its UCR determinations, Dr. Richards specifically requested all backup or supporting documentation. However, Wellpoint refused to provide this documentation, and stated in a letter that payments to out-of-network providers were made in accordance with a fee schedule developed by the Health Insurance Association of America, or HIAA. The ADA’s lawsuit points out that Well-point did not offer Dr. Richards any other procedures he might follow to further appeal its denial. Wellpoint’s response demonstrates that Dr. Richards had exhausted all potential internal grievance procedures, and that any further appeals by him, or by other dentists in similar situations, would be futile.
The database cited by Well-point in its letter to Dr. Richards was developed by HIAA and is known as the Prevailing Healthcare Charge System, or PHCS. In 1998, HIAA sold this system to Ingenix Inc., a wholly owned subsidiary of United Health Group. However, even at the time HIAA owned PHCS, it informed Wellpoint and other insurers that the PHCS was not intended to be used to establish UCR rates.
The ADA’s lawsuit lists a number of reasons why UCR determinations based on the PHCS database are artificially reduced because of flaws in the database. Among these reasons:
- – failure to break down reports of charges for various procedures in a particular region into sufficiently small geographic areas, which means that differences in actual charges over relatively large geographical areas with diverse populations and demographics are not revealed;
- – failure to categorize dental procedures based on the skill and experience of the dentist providing the service;
- – inclusion of charges for various procedures that incorporate in-network providers’ discounts to their usual charges, thus skewing the data below the true UCR rates.
Likewise, the lawsuit alleges, Wellpoint routinely fails to determine the usual and customary charges for dentists in the same geographical area. In addition, the ADA maintains that Wellpoint is unable to consider the specialty of the dentist performing a procedure, or the complexity of any procedure, in determining appropriate UCR amounts, since this information is not included in the PHCS database.
Thus, Drs. Arnold, Richards and Swanson are suing on behalf of all dentists who were paid less than their actual charges by Wellpoint on the basis of flawed UCR data, arguing that by failing to pay their actual charges, Wellpoint has violated its contracts with its subscribers, and its obligations under the Employee Retirement Income Security Act of 1974, or ERISA, which governs the group health plans covering these subscribers. The lawsuit charges that Wellpoint breached its contractual obligations in violation of ERISA by regularly failing to pay out-of-network dentists’ actual charges in the absence of data substantiating the appropriateness of a lower payment, and by representing that its UCR amounts were consistent with properly determined UCR charges when it knew, or had reason to know, that the amounts it paid were below true UCR amounts.
The lawsuit also alleges that Wellpoint has violated state law through the explanation of benefits, or EOB, forms it sends to subscribers. Specifically, Well-point has included on EOB statements a code "908," which states that the dentist’s "fee exceeds the customary and reasonable allowance for this procedure." The ADA argues that Wellpoint has committed trade libel by informing its subscribers that their dentists’ fees were excessive and unreasonable, thereby damaging the dentists’ reputations and disparaging the value of services rendered by those dentists. Moreover, the lawsuit charges that Wellpoint also illegally interfered with dentists’ contractual or business relationships with their patients by falsely representing to Well-point subscribers that out-of-network dentists were charging excessive fees. In a number of cases, the lawsuit states, dentists have lost long-standing patients who were led to believe that their dentist attempted to charge an excessive fee.
The ADA and the dentist plaintiffs are seeking injunctions to stop Wellpoint from paying less than out-of-network dentists’ actual charges, unless Wellpoint produces data substantiating lower UCR fees, and to stop Wellpoint from falsely representing on EOB forms that dentists are overcharging their patients. Furthermore, the lawsuit asks for monetary damages for all out-of-network dentists who have received improperly reduced reimbursement from Wellpoint, or whose relationships with their patients have been harmed by Wellpoint’s statements about those dentists’ charges.
This relief is similar to what the ADA is seeking in its first lawsuit filed against Aetna Inc. last year. As we expected, both the Aetna and Wellpoint cases are moving slowly through the federal court system. While the ADA pursues litigation against these two companies, attorneys in the Legal Division continue to receive and review new complaints from members about insurer or health plan practices, and we are continuing to explore whether it may be appropriate to file lawsuits against other carriers.
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