Health insurance giant Cigna is facing a lawsuit accusing the company of using computer algorithms to automatically deny claims to hundreds of thousands of people, thereby violating a California rule mandating each claim to be properly examined.
The class-action lawsuit, filed on Monday at a federal court in Sacramento, insists that Cigna breached the rights of its insurance holders. California Insurance Regulations require insurance firms like Cigna to conduct a “thorough, fair, and objective” investigation of each medical expense bill submitted as part of a claim, the lawsuit points out.
As such, Cigna’s medical doctors are required to examine patient records, review coverage policies, and use their expertise to determine whether claims should be approved or denied.
However, Cigna doctors used a company-developed algorithm called PXDX to automatically deny claims to “hundreds of thousands” of people in batches that do not meet certain pre-set criteria, the lawsuit alleged.
“Relying on the PXDX system, Cigna’s doctors instantly reject claims on medical grounds without ever opening patient files, leaving thousands of patients effectively without coverage and with unexpected bills. The scope of this problem is massive,” the lawsuit said.
“For example, over a period of two months in 2022, Cigna doctors denied over 300,000 requests for payments using this method, spending an average of just 1.2 seconds ‘reviewing’ each request.”
The lawsuit pointed out that PXDX allows Cigna to save money on labor costs associated with paying doctors and other employees to conduct a manual review for each insurance claim.
The company uses PXDX as the firm knows “it will not be held accountable for wrongful denials” due to the low rate of challenge for such denials, per the lawsuit.
“For instance, Cigna knows that only a tiny minority of policyholders (roughly 0.2 percent) will appeal denied claims, and the vast majority will either pay out-of-pocket costs or forgo the at-issue procedure.”
“By engaging in this misconduct, Cigna breached its fiduciary duties, including its duty of good faith and fair dealing, because its conduct serves Cigna’s own economic self-interest and elevates Cigna’s interests above the interests of its insureds,” the lawsuit stated.
The case is filed by two individuals who say that their claims were denied due to the PXDX system. The lawsuit is being brought by the plaintiffs on their own behalf as well as on behalf of all other individuals in a similar situation.
Cigna Expose, Company Response
The Cigna lawsuit comes following a March 25 report by ProPublica which had highlighted the use of PXDX in the speedy denials of claims.One doctor was reported to have rejected 121,000 claims in the first two months of 2022. Another doctor handed down over 80,000 instant denials during this period.
Ron Howrigon, a former Cigna executive, told the outlet that the use of PXDX makes business sense. “Why not just deny them all and see which ones come back on appeal? From a cost perspective, it makes sense.”
He pointed out that many patients would opt to pay their bills rather than deal with the hassles involved in appealing a rejection.
Meanwhile, Cigna has dismissed the lawsuit. In a statement, the health care firm said that the case “appears highly questionable and seems to be based entirely on a poorly reported article that skewed the facts,” according to the Associated Press.
“Cigna uses technology to verify that the codes on some of the most common, low-cost procedures are submitted correctly based on our publicly available coverage policies, and this is done to help expedite physician reimbursement,” it said.
“The review takes place after patients have received treatment, so it does not result in any denials of care. If codes are submitted incorrectly, we provide clear guidance on resubmission and how to appeal.”
Based in Connecticut, the health insurance company has 18 million members throughout the United States, which includes over two million in California.
Lawmakers Question Cigna
The PXDX issue has caught the attention of lawmakers. On May 16, House Energy and Commerce Committee chair Cathy McMorris Rodgers (R-Wash.) and two other lawmakers wrote a letter to Cigna CEO David Cordani, asking for “documents and information related to Cigna’s procedure-to-diagnosis (PXDX) review process.”Citing the ProPublica report, the letter said that only 5 percent of policyholders are estimated to appeal denial of coverage.
“By contrast, in Cigna’s Medicare Advantage plans, nearly one in five prior authorization denials were appealed. Perhaps more concerningly, 80 percent of denials were overturned,” the letter stated.
“If these figures are at all illustrative of Cigna’s commercial appeal and reversal rates, it would suggest that the PXDX review process is leading to policyholders paying out-of-pocket for medical care that should be covered under their health insurance contract.”
As Cigna claimed that media reporting on its PXDX review was biased and incomplete, the lawmakers provided the firm with an opportunity to clarify the matter, the letter said.
In addition to PXDX’s review process, the letter sought information on the insurance plans that are subject to PXDX’s review, the medical directors who approve denials generated by such reviews, and the number of claims reviewed and denied through the PXDX process last year among others.
