First Health settlement shifts claims to insurers

By Steve Korris | Feb 3, 2010


First Health Group, reviewer of medical bills for insurance companies, escaped a LakinChapman class action without paying a penny in claims.

A settlement that Madison County Circuit Judge Daniel Stack approved in January shifts all claims to insurers that hired First Health.

Members of preferred provider organizations who wish to recover discounts that First Health trimmed from their bills can seek recovery from the insurers.

LakinChapman lawyers alleged that First Health discounted bills for about 23,000 preferred providers but broke a promise to steer patients to them.

LakinChapman let First Health off the hook after discovering its contracts clearly pinned liability for claims on insurers.

Stack wrote that "exhaustive analysis of the claims against First Health reveals that the class faces significant obstacles to any recovery whatsoever."

He wrote that "class relief under the settlement far exceeds the relief available against First Health, which is at best negligible."

First Health didn't take a free pass, however, for it agreed to pay $1.25 million for "continuing medical education programs."

First Health will also pay LakinChapman $650,000.

First Health and LakinChapman reached agreement a year ago, but former Lakin lawyer Richard Burke delayed approval by objecting.

Burke argued that the settlement worked against the interest of a class he seeks to represent in St. Clair County.

Stack held three hearings on Burke's objection last year.

Stack's settlement order overruled the objection in its entirety.

Stack wrote that LakinChapman certified four PPO class actions and settled six.

Several of the cases involved Burke when he was with the firm, Stack wrote.

He rejected Burke's claim that his St. Clair County suit would prove breach of contract.

He wrote that Burke didn't assert breach of contract until after the settlement.

"The failure to assert a breach of contract claim earlier is curious, especially since objector's counsel formerly represented the very plaintiffs in this case," he wrote.

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