Judge OKs $3.75M deal to settle class action accusing Blue Cross parent over mental health claims

By DM Herra | Oct 25, 2018

Diego Delso [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)], from Wikimedia Commons

A class action suit alleging Health Care Service Corporation, the parent company of health insurance behemoth Blue Cross Blue Shield, improperly refused to pay for mental health services, has ended in a $3.75 million settlement.

Federal Judge Virginia M. Kendall approved the final settlement on Oct. 19, granting $1.125 million in fees to law firms Zuckerman Spaeder LLP, Psych-Appeal Inc. and Miner, Barnhill & Galland P.C. and $17,000 each to the lead plaintiffs, Landis Seger and her son, identified in court documents as John Doe.

In their suit, Seger and Doe claimed HCSC used the criteria of “medical necessity” as grounds to deny insurance claims for residential mental health services. According to court documents, the insurer was using outdated behavioral health guidelines that allowed them to deny mental health services not deemed “medically necessary.” The plaintiffs alleged this violated the company’s responsibility under the Employment Retirement Income Security Act and the Parity Act.

The plaintiffs argued that the criteria HCSC used to deny the claims are inconsistent with generally accepted standards of care and with the terms of insurance plans the company administered. Generally accepted standards recognize residential treatment as a viable option to treat chronic, long-term and subacute mental health needs, they asserted.

The plaintiffs originally brought their case as part of a 2014 action, but their claims were severed from the others in that case in 2016. Seger then filed a second amended complaint. The parties said they reached an agreement in principle in late 2017 and finalized it July 9.

In her order approving the settlement, Kendall also certified the settlement class, defined as individuals whose claims for coverage of residential mental health services were denied by HCSC between July 30, 2011, and Dec. 15, 2016, on the grounds they were not medically necessary.

Class members will split the settlement based on the number of days each spent in residential treatment during the class period. A formula will be applied to calculate the percentage of the award that will be awarded to each class member based on either 12 treatment days or the number of denied non-overlapping treatment days, whichever is greater.

According to the judge’s order, notices were mailed to 1,281 class members, eight of whom opted out of the settlement. If any of the class members do not cash their settlement checks, after two attempts to reach them the settlement administrator can withdraw that person’s share of the pot and set it aside in a residual fund. If the residual fund exceeds $15,000 it will be evenly split among the remaining class members; if it does not it will be donated to the National Alliance on Mental Illness.

The settlement does not require HCSC to admit any wrongdoing and cannot be used against the insurer. It also releases the company from future claims on similar grounds brought by any of the class members.

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Organizations in this Story

Health Care Services Corporation Miner, Barnhill & Galland, PC U.S. District Court for the Northern District of Illinois Zuckerman Spaeder LLP

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