Class action claims State Farm schemed to lower payouts

Two Illinois chiropractors filed a class action complaint against State Farm Fire & Casualty Company in Madison County Circuit Court Jan. 18, alleging the insurer lowered payments by claiming preferred provider organization (PPO) agreements, but without actually performing any of the associated obligations to those agreements.

According to the complaint, this "improper" practice is known in the insurance industry as a "silent PPO."

Frank Bemis of Alton and Richard Martis of Pekin claim State Farm improperly withheld payments from them and the class for valid insurance claims, and that they are not entitled to retain the money, nor are they otherwise entitled to any PPO discounts.

Bemis and Martin are represented by the Lakin Law Firm of Wood River, Campbell & McGrady of Godfrey, and Donald Birner of Pekin.

A PPO is a network of healthcare providers who agree to offer preferred pricing in return for receiving patient referrals. Preferred providers are also board certified and credentialed in the community where they live and work.

State Farm's acts and omissions are in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act and similar laws of other states, as well as civil conspiracy and unjust enrichment, the complaint alleges.

The plaintiffs also claim that they entered into a provider agreement with First Health Network for the purpose of increasing the volume of insured people and other beneficiaries seeking services from him through referrals, channeling and steerage.

First Health, in turn, entered into agreements with payors, including State Farm, pursuant to which the payors would have access to the First Health Network and its discounts.

"Under these provider agreements, the provider networks and their affiliated payors have an obligation to provide meaningful referrals, channeling and steerage to network providers to justify the discounted rates the providers have agreed to accept," the complaint states.

Bemis and Martis claim that the increased volume of patients resulting from referrals is an essential benefit of a PPO from their standpoint and claims that State Farm failed to fulfill their obligations and did not take the requisite steps to provide referrals, channeling and steerage. Instead, the insurance companies paid them and other class members at discounted rates.

They claim State Farm's misconduct increased their profits, while they and other class members were injured by being paid discounted fees for their services without obtaining the expected benefits of an increased flow of patients.

"By operating a silent PPO, State Farm has illegally reaped huge savings while giving no consideration to healthcare providers," the complaint states.

They claim the class has been economically damaged and has suffered monetary losses as a result of State Farm's conduct.

Bemis and Martis claim the members of the class, being geographically dispersed and numbering in the thousands, are so numerous that a single action is impracticable.

They are seeking individually and on behalf of the class for the court to award them and the class members their individual damages and attorneys' fees and allowable costs, but in no event shall it exceed $75,000 exclusive of interest.

The case has yet to be assigned.

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