Court Cases

Clover Health Investments Corp. said it has reached an agreement to settle seven shareholder-filed lawsuits that accused the Medicare-focused insurer of concealing material information from investors before going public. In April, the company agreed to pay $22 million to settle a similar class-action lawsuit filed by shareholders, which centered on allegations outlined in a report from the activist short-selling firm Hindenburg Research. That report called Clover a “broken business” that “misled investors about critical aspects” of its operations in the run-up to the company’s 2021 debut on the stock market, including failing to disclose an active Dept. of Justice investigation. Clover did not admit wrongdoing as part of either the April settlement or the June agreement, which will resolve the remaining shareholder-led civil cases filed against it in Delaware, New York, and Tennessee courts.

The Pharmaceutical Research and Manufacturers of America (PhRMA) sued the Biden administration over Medicare drug price negotiation and inflation cap provisions in the Inflation Reduction Act (IRA), arguing that the policies are unconstitutional. Two patient assistance groups, the National Infusion Center Association and the Global Colon Cancer Association, joined the lawsuit, which was filed in the U.S. District Court for the Western District of Texas, per a PhRMA press release. The U.S. Chamber of Commerce, Bristol Myers Squibb, and Merck & Co. Inc. filed their own lawsuits against the drug price provisions of the law in recent weeks, and Biogen Inc.’s CEO said that his firm may do the same. The Chamber of Commerce was a major financial backer of legal efforts to overturn the Affordable Care Act during the 2010s, and it filed an amicus brief in support of the lawsuit that ultimately led to the U.S. Supreme Court’s move to strike down mandatory state Medicaid expansion.

The Biden administration reached a deal with the Texas company Braidwood Management to preserve the Affordable Care Act’s preventive coverage mandate while the firm’s legal challenge to that provision is litigated. In March, Texas District Court Judge Reed O’Connor ruled that it’s unconstitutional for the ACA to require group and individual health plans to fully cover certain services recommended by the U.S. Preventive Services Task Force, and he said requiring employer plan sponsors to cover preexposure prophylaxis (PrEP) for HIV violates the Religious Freedom Restoration Act of 1993. The Fifth Circuit Court of Appeals temporarily stayed the ruling in May and instructed the parties in the case to agree on how the ACA’s preventive coverage mandate should be handled as an appeal of O’Connor’s ruling proceeds. As part of the agreement — which still has to be approved by the appeals court — just the parties challenging the preventive coverage mandate may opt out of covering USPSTF-recommended services or PrEP; all other health plans must cover those services without cost sharing.

For the second time in recent history, New York City Comptroller Brad Lander is refusing to register the city’s contract with a Medicare Advantage insurer. But this time it’s not just legal challenges that has the comptroller questioning the city’s move away from fee-for-service (FFS) Medicare, but the broader trends in the MA industry. And CVS Health Corp.’s Aetna is ready to defend its positioning as an experienced provider of retiree health benefits.

After multiple delays, the city was planning to transition some 250,000 retirees and their eligible dependents on Sept. 1 to a PPO plan administered by Aetna. The contract is valued at $15 billion over the first five-plus years of the agreement.

Friday Health Plans Management Services Company, Inc. — a Colorado-based insurer that offers Affordable Care Act exchange plans in seven states — is in a downward spiral. Concerned by the company’s deteriorating financial situation, state regulators are taking steps such as putting the insurer’s subsidiaries under supervision and placing them into receivership.

Georgia, for example, recently garnered headlines by announcing that Friday enrollees will need to find a different health plan. And Colorado said on June 1 that it will work with the insurer to wind down its business across the country due to ongoing capital shortfalls.

In a unanimous 9-0 vote, the Supreme Court on June 1 overturned a lower court’s decision pertaining to the False Claims Act (FCA) and allegations that two large pharmacy chains overcharged the federal government for prescription medications. Experts tell AIS Health, a division of MMIT, that the ruling is significant for health insurers because the FCA disproportionately impacts the health care industry.

The Department of Justice (DOJ), for instance, said it obtained more than $2.2 billion in settlements and judgments involving fraud and false claims for the 12 months through Sept. 30, 2022. More than $1.7 billion of that total involved the health care industry.

Walgreen Co. filed a lawsuit last month asking a judge to overturn a $642 million arbitration judgment awarded to Humana Inc. pertaining to a dispute over drug pricing. The pharmacy giant alleged that it was seeking the reversal in part because a law firm that used to represent Walgreens allegedly switched sides and encouraged Humana to seek the arbitration. “This arbitration began in betrayal and ended in a miscarriage of justice,” Walgreens’ filing claimed.

The case highlights a common disagreement between payers and pharmacies over reimbursement, although it is unusual to see a company blame a law firm for sparking such a clash, according to a lawyer and pharmacist who spoke with AIS Health, a division of MMIT.

Merck & Co., Inc. filed a lawsuit on June 6 against the federal government, seeking to halt provisions in the Inflation Reduction Act (IRA) related to Medicare drug price negotiations. The suit, filed in the U.S. District Court for the District of Columbia, is the first involving a pharmaceutical company challenging that part of the IRA. Starting in 2026, the government for the first time will negotiate the price of certain high-cost medications that are not subject to generic or biosimilar competition. Merck contends in its lawsuit that the drug price negotiation program “is a sham” and “is tantamount to extortion” and violates the First and Fifth amendments to the U.S. Constitution.

A Massachusetts resident last month sued CVS Health Corp. for using an artificial intelligence (AI) platform during a job interview, the Boston Globe reported. In the class-action lawsuit, Brendan Baker alleged CVS’s use of the HireVue AI system to assess job candidates’ honesty violated Massachusetts law, which forbids employers from using a polygraph or similar tests as a condition of employment. Companies such as T-Mobile and Delta Airlines have used HireVue.

In a case closely watched by the health insurance industry, US ex rel. Schutte v. SuperValu, Inc., the Supreme Court on June 1 reversed an appeals court decision that would have hobbled the government’s use of the False Claims Act (FCA) to pursue fraud cases. The SuperValu case — which was consolidated with another whistleblower case, U.S. ex rel. Proctor v. Safeway, Inc. — concerned whether the two pharmacy/grocery chains knowingly filched the U.S. government by “usual and customary” prices for prescription drugs that failed to account for various discount programs. The Seventh Circuit Court of Appeals previously ruled that the companies aren’t liable under the FCA because they could prove they made an “objectively reasonable” interpretation of an ambiguous statute, regardless of whether they intended to commit fraud. But in a unanimous Supreme Court opinion, Justice Clarence Thomas wrote that FCA liability instead should hinge on “what the defendant thought when submitting the false claim — not what the defendant may have thought after submitting it.” In an amicus brief submitted in April, AHIP and the American Hospital Association warned that a ruling in favor of the government’s position in the cases would “create a Wild West of ramifications for any well-intentioned and legitimate hospital or insurance provider that seeks to serve Americans in partnership with the government.”

The national uninsured rate in 2022 was 8.4%, down from 9.2% in 2021 and 9.7% in 2020, according to the Centers for Disease Control and Prevention’s National Health Interview Survey. In a May 18 research note, Citi analyst Jason Cassorla noted that the lower uninsured rate is “not surprising” given efforts to make the Affordable Care Act marketplaces more affordable and accessible, such as elongated special enrollment periods and enhanced premium subsidies. Another likely factor is the Medicaid continuous enrollment requirement that was in place until April 1, 2023, due to the COVID-19 public health emergency. Since Medicaid eligibility redeterminations have now resumed, “we would expect upward pressure on the uninsured rate” going forward, Cassorla wrote, but he added that a “partial offset” would come from newly Medicaid-ineligible individuals signing up for ACA marketplace coverage.