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Top HMO Sued For Deception

While lawmakers prepare to debate new rights for patients, one group has already filed a federal lawsuit against a health maintenance organization, accusing it of misleading its members about how it makes coverage decisions.

The suit, filed Monday in Miami and seeking class-action status, alleges that Humana Inc. didn't tell customers that cost -- not medical need -- is the main factor behind its decisions on what medical care it approves for members.

"Humana used undisclosed criteria that were unrelated to patients' medical needs," said Joseph Sellers, a partner in the law firm of Cohen, Milstein, Hausfeld & Toll.

"We believe that this is plain old fraud," he told CBS News Correspondent Dan Raviv.

Louisville, Ky.-based Humana paid cash bonuses to claim reviewers and had financial arrangements with doctors "that were clearly designed to reduce the number of patient claims that would be approved," the suit says.

Humana officials said they could not comment on the specific allegations because they did not have a copy of the suit. But the company said it planned a vigorous defense.

It also said it supports a process whereby independent physicians determine whether a requested health service is appropriate.

Humana, one of the nation's largest managed health care companies, has about 6.1 million members in 15 states and Puerto Rico.

The suit was filed in federal district court in Miami on behalf of two Riviera Beach, Fla. police officers.

The lawsuit is the first of many that several powerful lawyers, including some who gained high profiles in litigation against tobacco companies and Microsoft Corp., plan to file in coming weeks to challenge coverage decisions of HMOs.

Seller's Washington D.C. firm filed the lawsuit along with the firm of Boies & Schiller of Armonk, N.Y. David Boies of Boies & Schiller, is a leading attorney working for the Justice Department's antitrust case against Microsoft.

Health care industry lobbyist Karen Ignagni suggests the plaintiffs will just "open up the floodgates" to other lawsuits that seek money, not justice.

"That would mean higher costs, putting this whole system into a tailspin, and I'm not sure any member of Congress wants to do that," she says.

On Wednesday, the House will consider bills that could make it easier for consumers to sue managed-care companies and that are designed to answer President Clinton's call for a "Patient's Bill of Rights."