EAST ST. LOUIS — A trio of Medicare Advantage Organization/Medicare Secondary Payer companies have filed a putative class action against State Farm for not reimbursing the medical expenses the companies paid on behalf of its policyholders.
MAO-MSO Recovery II, an entity incorporated in Delaware, and Florida-incorporated MSP Recovery and MSPA Claims, are asking for double damages allowed under federal law, according to their complaint filed in February in U.S. District Court for the Southern District of Illinois. The three companies' complaint didn't specify a dollar amount in their lawsuit against State Farm Mutual Automobile Insurance, headquartered in Bloomington, but given the number of policyholders, the amount of potential damages could be very high.
"Currently, there are over 16 million individuals enrolled in Medicare Advantage plans nationwide," the lawsuit said. "More than 37 million individuals are enrolled in Medicare prescription drug plans ('PDPs'), either on a stand-alone basis or in connection with a Medicare Advantage plan. The size and expense of the Medicare Advantage program makes it important that auto insurance companies, like Defendant, do not deflect their financial obligations under the MSP law onto MAOs and ultimately onto the Medicare Trust Funds."
The three businesses claim that State Farm failed to reimburse Medicare Advantage Organizations (MAOs) for medical expenses arising from injuries suffered during automobile accidents as State Farm is legally required to do.
"Under Medicare Secondary Payer provisions of the Medicare Act, MAOs are, by law, secondary payers for any medical expenses that are covered by a policy of insurance under its terms and provisions," the suit said. "This means that when there is any other source that is responsible for payment for a medical claim(s), i.e., an insurance policy, that has a contractual obligation to pay for the medical services pursuant to the terms and conditions of the policy, there is a 'demonstrated responsibility' requiring the primary payer to pay pursuant to it terms and conditions before a Medicare payer like Plaintiffs and the class should pay for the same medical expenses."
Plaintiffs in the case say they've provided benefits to Medicare-eligible beneficiaries who are part of Medicare Advantage and, at the same time, covered by insurance policies issued by State Farm. That, the lawsuit claims, makes the insurance giant the primary payer for their medical bills, services and related expenses that the plaintiffs have been paying but for which State Farm hasn't been reimbursing them.
Plaintiffs are seeking reimbursement for those accident-related medical expenses they claim State Farm should have paid. They also are seeking double the damages under federal private cause of action and breach of contract laws.
Before 1980, Medicare was the primary payer of medical costs in cases where a beneficiary was injured, according to the complaint. In those cases, medical bills went directly to Medicare, regardless of any overlapping insurance the patient might have had. "However, in an effort to reduce escalating costs, Congress altered the Medicare payment scheme in 1980 by adding the Medicare Secondary Payer ('MSP') provisions to the Medicare Act," the complaint said.
That congressional action effectively made Medicare the secondary payer, after all other coverage. "If there is overlapping insurance coverage for a particular beneficiary, that overlapping coverage is primary, i.e., it pays the medical expense first—Medicare is always secondary," the complaint said.
This and other factors led to the situation the three plaintiffs, and any other class members who might want to join the lawsuit, have with State Farm, according to the complaint.