In re Wellpoint, Inc. Out–of–Network “UCR” Rates Litig.

Citation865 F.Supp.2d 1002
Decision Date11 August 2011
Docket NumberNo. MDL 09–2074 PSG (FFMx).,MDL 09–2074 PSG (FFMx).
PartiesIn re WELLPOINT, INC. OUT–OF–NETWORK “UCR” RATES LITIGATION.
CourtU.S. District Court — Central District of California

865 F.Supp.2d 1002

52 Employee Benefits Cas.
1371

In re WELLPOINT, INC. OUT–OF–NETWORK “UCR” RATES LITIGATION.

No. MDL 09–2074 PSG (FFMx).

United States District Court,
C.D. California.

Aug. 11, 2011.


[865 F.Supp.2d 1014]


Christopher M. Burke, Kristen Marie Anderson, Scott & Scott LLP, Los Angeles, CA, Christopher A. Seeger, Stephen A. Weiss, Diogenes Kekatos, James A. O'Brien, III, Seeger Weiss LLP, Joseph P. Guglielmo, Scott & Scott LLP, New York, NY, James Robert Hail, John A. Lowther, IV, William James Doyle, II, Doyle Lowther LLP, Michael C. Eyerly, Scott & Scott LLP, San Diego, CA, Andrew S. Friedman, Bonnett Fairbourn Friedman & Balint PC, Phoenix, AZ, Raymond Paul Boucher, Kiesel Boucher & Larson LLP, Beverly Hills, CA, Amanda F. Lawrence, Scott & Scott LLP, Colchester, CT, for Michael Roberts.

Lisa M. Burger, Mark N. Todzo, Lexington Law Group LLP, San Francisco, CA, Andrew S. Friedman, Bonnett Fairbourn Friedman & Balint PC, Phoenix, AZ, Michael C. Eyerly, Scott & Scott LLP, San Diego, CA, Raymond Paul Boucher, Kiesel Boucher & Larson LLP, Beverly Hills, CA, Amanda F. Lawrence, Scott & Scott LLP, Colchester, CT, for J.B.W. a Minor.


Artin Gholian, Brian S. Kabateck, Helen E. Zukin, Joshua H. Haffner, Kabeteck Kellner LLP, Los Angeles, CA, D. Brian Hufford, Robert J. Axelrod, Susan J. Weiswasser, Pomerantz Haudek Block Grossman And Gross LLP, Edith M. Kallas, Joe R. Whatley, Jr. Whatley Drake & Kallas LLC, New York, NY, Raymond Paul Boucher, Kiesel Boucher & Larson LLP, Beverly Hills, CA, Richard L. Kellner, Kabateck Brown Kellner LLP, Los Angeles, CA, W. Tucker Brown, Whatley Drake & Kallas LLC, Birmingham, AL, Andrew S. Friedman, Bonnett Fairbourn Friedman & Balint PC, Phoenix, AZ, Martha J. Fessenden, Doffermyre Shields Canfield & Knowles, LLC, Atlanta, GA, Amanda F. Lawrence, Scott & Scott LLP, Colchester, CT, for American Medical Association/California Medical Association/Medical Association of Georgia/Connecticut State Medical Society/North Carolina Medical Society.

Christopher P. Ridout, Ridout & Lyon LLP, Long Beach, CA, David M. Sternfield, Law Offices Of David M Sternfield LLC, Eric D. Freed, George K. Lang, Jeffrey A. Leon, Freed & Weiss LLC, Chicago, IL, Devon Marie Lyon, Ridout & Lyon LLP, Long Beach, CA, Richard J. Burke, Richard J. Burke LLC, St. Louis, MO, for S. Higashi.

Ellen M. Doyle, Joseph N. Kravec, Jr., William T. Payne, Stember Feinstein Doyle & Payne LLC, Pittsburgh, PA, Janet Lindner Spielberg, Janet L. Spielberg Law Offices, Los Angeles, CA, Maury A. Herman, Stephen J. Herman, Herman Gerell LLP, Atlanta, CA, for North Peninsula Surgical Center, L.P. et al.

Barbara G. Quackenbos, Barry M. Epstein, Kevin P. Roddy, Wilentz Goldman & Spitzer PA, Woodbridge, NJ, Donald E. Haviland, Jr., Haviland Hughes LLC, Philadelphia, PA, Andrew S. Friedman, Bonnett Fairbourn Friedman & Balint PC, Phoenix, AZ, Michael C. Eyerly, Scott & Scott LLP, San Diego, CA, Raymond Paul Boucher, Kiesel Boucher & Larson LLP, Beverly Hills, CA, Amanda F. Lawrence, Scott & Scott LLP, Colchester, CT, for Darryl Samsell.

[865 F.Supp.2d 1015]



Brent Johnson, Kit A. Pierson, Cohen Milstein Sellers & Toll PLLC, Washington, DC, Robert J. Rohrberger, Fox Rothschild LLP, Roseland, NJ, for V. O'Brien.


Michael D. Braun, Braun Law Group PC, Los Angeles, CA, for Michael Pariser.


Richard B. Brualdi, Brualdi Law Firm Sue Lee, The Brualdi Law Firm, New York, NY, for H. Bernard.


Elaine A. Ryan, Bonnett Fairbourn Friedman & Balint PC, Phoenix, AZ, Tonna Kaye Farrar, Bonnett Fairbourn Friedman & Balint PC, San Diego, CA, for American Podiatric Medical Association/California Chiropractic Association/California Psychological Association/Dr.
James Peck Psy.D.

Medical Association of Georgia, pro se.


Ivy Seigle–Epstein, pro se.


Stephanie Higashi, pro se.


Proceedings: (In Chambers) Order Granting in Part and Denying in Part Defendants WellPoint, Inc., United HealthGroup, Inc., and Ingenix, Inc.'s Motions to Dismiss

PHILIP S. GUTIERREZ, District Judge.

Pending before the Court are Defendants WellPoint, Inc., United HealthGroup, Inc., and Ingenix, Inc.'s Motions to Dismiss the Second Amended Multi–District Litigation Complaint. The Court heard argument on the motions on November 22, 2011. Having read and considered the moving and opposing papers, as well as the arguments presented at the hearing, the Court GRANTS in part and DENIES in part the motions to dismiss.

I. Background

This case concerns insurance subscribers and healthcare providers who claim that the nation's largest healthcare insurer failed to properly reimburse them for out-of-network services (“ONS”). They were allegedly promised a “usual, customary, and reasonable” (“UCR”) rate of reimbursement, but were underpaid due to flawed UCR data provided by the country's largest database.

A. WellPoint's ONS Coverage

Defendant WellPoint, Inc. (“WellPoint”) is the largest health insurer in the United States. WellPoint and its many subsidiaries and affiliates (collectively, the “WellPoint Defendants”) 1 offer insurance coverage for medical treatment provided by various healthcare providers, including

[865 F.Supp.2d 1016]

physicians, physician groups, hospitals, clinics, and ambulatory and surgical centers. See Second Consolidated Am. Compl. (“SAC”). ¶ 8, n. 1. Healthcare providers are classified as either (a) “in-network” providers who have negotiated discounted rates with WellPoint or (b) out-of-network providers who charge their normal rates. See id. ¶ 8. WellPoint allegedly promises to reimburse subscribers for ONS obtained from out-of-network providers at a percentage of the lesser of either (1) the actual amount of the subscribers' medical bills or (2) the UCR rate charged by providers “in the same or similar geographic area” for “substantially the same service.” See id. ¶ 10. The primary concern in this action is whether WellPoint paid the UCR rate when reimbursing ONS. This question turns on how WellPoint determines what reimbursement rate would be “usual, customary, and reasonable” for a given medical procedure in a particular geographic area.

B. The Genesis of Ingenix

WellPoint contracts with Defendant Ingenix, Inc. (“Ingenix”) to obtain ONS reimbursement data. Ingenix is a wholly owned subsidiary of Defendant UnitedHealth Group, Inc. (“UHG”) (together with Ingenix, the “UHG Defendants”) and maintains a proprietary database, which compiles ONS reimbursement data provided by various health insurance companies and provides billing rates back to those same insurance companies (the “Ingenix Database”). See id. ¶ 117. In 1973, the Health Insurance Association of America (“HIAA”), a trade group for the health insurance industry, developed the Prevailing Health Charges System (“PHCS”), a database used to obtain charging information for various medical procedures. See id. ¶¶ 63(c), 105.2 HIAA members developed and managed the PHCS database, which eventually became the largest pool of charge data for medical services in the country. See id. ¶ 105. The PHCS was not intended to set UCR rates, and HIAA included a disclaimer that PHCS data was provided “for information purposes only.” Id. ¶ 109.

In October 1998, the members of HIAA, including WellPoint, sold the PHCS to Ingenix, which was in the process of acquiring more than 50 medical databases in order to “acquire a dominant position in the market for the provision of data services used to calculate UCR.” See id. ¶ 110.

[865 F.Supp.2d 1017]

As part of the PHCS sale, members of HIAA, including WellPoint, were permitted to participate in an ongoing “Ingenix PHCS Advisory Committee,” which provided for industry input into how Ingenix acquired and managed its data. See id. ¶ 111. HIAA entered into a 10–year Cooperation Agreement, which guaranteed HIAA's continued input into the management of the Ingenix Database in the form of a joint “Liaison Committee” and provided discounts for HIAA members who contributed data to the Ingenix Database. See id. ¶ 112. Additionally, upon the PHCS sale, the parent of Ingenix (UHG) agreed to become a member of HIAA without having to pay any membership dues during this period.

C. Criticism of the Ingenix Database

Ingenix provides participating insurers with uniform pricing schedules that provide billing ranges for given medical procedures in various geographic locations. See id. ¶ 116. This information is allegedly calculated according to just four data points: (1) the date of service, (2) the Current Procedural Terminology (“CPT”) code, (3) the zip code where the service was provided, and (4) the amount billed by the provider. See id. ¶ 119. In addition to this purportedly flawed methodology, Ingenix and the participating insurers allegedly manipulate the data in order to populate the Ingenix Database with deflated UCR figures. First, the participating insurers “scrub” their submissions to Ingenix by removing the highest value claims. See id. ¶ 120. This practice allegedly persisted since 2003, when Ingenix began requiring participant insurers to certify that their submissions were complete. See id. Second, Ingenix pools all of the claims submissions and removes “high-end” values as statistical outliers. See id. ¶ 125. The data provided by Ingenix is further skewed because Ingenix allegedly fails to accurately tabulate data according to geographic area. See id. ¶ 126. Ingenix then produces two cycles of pricing schedules for participating insurers. See id. ¶ 129. WellPoint uploads these schedules onto its computerized claims platform to determine ONS reimbursement rates. See id. ¶ 130. Neither WellPoint nor the other participating insurers independently verify the accuracy of the data received from Ingenix. See id. ¶ 133.

This system of ONS reimbursement has become the subject of an investigation by the New York Attorney General (“NYAG”), and an investigative task force of the NYAG determined that health insurers who participate in the Ingenix data collection have an incentive to provide artificially low claims...

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