Chiropractors and Horizon BCBS-NJ reach a $33 million Settlement Agreement over alleged violations of the Employee Retirement Income Security Act (ERISA)

Alphonse DeMaria, et al., v. Horizon Healthcare Services, Inc., d/b/a Blue Cross Blue Shield of New Jersey, et al.. Civ. No. 11-7298 (WJM) (U.S. Dist Ct New Jersey)

On June 20, 2016 a federal District Court judge in New Jersey signed an “Order Preliminarily Approving Class Action Settlement” tentatively ending combat between chiropractic plaintiffs in a class action lawsuit brought against Horizon Healthcare Services (Blue Cross and Blue Shield of New Jersey).   The $33 million settlement is intended to terminate claims that the Horizon improperly denied benefit claims for chiropractic care and treatment in violation of the Employee Retirement Income Security Act (ERISA).  Actually, the parties reached a final settlement agreement in principle on May 6, 2015 but it took over a year to hammer out the details.

Although “preliminarily approved” the Settlement Agreement does not become effective until September 8, 2016 at which time the court has scheduled a “Final Approval Hearing” to air any objections to the settlement and to allow persons and parties to opt out of the Settlement.  At the Final Approval Hearing, the court will consider whether the settlement should be finalized and approved as fair, reasonable, and adequate for the Class.

In June 2015, the federal District Court had certified two classes in DeMaria – one an ERISA Class and a separate Non-ERISA Class.  In Plaintiffs “Memorandum of Law in Support of Plaintiffs’ Unopposed Motion for Preliminary Approval of Class Settlement, Plaintiffs noted that

“New Jersey chiropractors regularly provided Class members with three types of chiropractic treatment: (1) chiropractic manipulative therapy (“CMT”); (2) evaluation and management services (“E/M”); and (3) ancillary physical therapy (“PT”).  During the Class Period – December 16, 2005 April 10, 2010 – six years before the filing of the complaint, Horizon paid for CMT but denied all claims for E/M and PT performed on the same day as CMT on the theory that Horizon could ‘bundle’ all payments for all chiropractic treatments into a single fee for CMT.  Denial of payments for E/M and PT was automatic, and denial of all appeals was also automatic.

“In October 2009, the New Jersey Department of Banking and Insurance (“DOBI”) determined that Horizon’s bundling practice violated New Jersey’s Unfair Claim Settlement Practices Act, N.J. Stat. Ann. § 17B:30-13.1 (West). DOBI issued a cease and desist order effective April 15, 2010, requiring Horizon to cease automatically “bundling” all PT and EM claims into CMT claims without individual claims determinations, which practice Horizon ceased as of 2010.”
Following pre-litigation investigation, Plaintiff’s and their counsel stated the instant lawsuit on December 16, 2011. In addition, to Plaintiff’s state-based claims, Plaintiff’s First Amended Complaint also alleged claims under ERISA as well as State law.  Horizon moved to dismiss which was granted in part, but also denied in part.  After “extensive discovery” consisting of roughly 15,000 documents of more than 200,000 pages and claims data of more than 19 million claims records and 20 depositions, the court certified the classes as noted above.  As part of the “Class Certification Order,” the District Court ruled that “the only relief Class would be entitled to would be an order directing Horizon to re-process claims without the bundling policy, but did not indicate how such re-processing would occur.  Thus, even if Plaintiffs and the Class had prevailed at trial, there remains the likelihood of future disputes between Class members and Horizon concerning the manner in which Horizon paid or denied such re-processed claims, as well as protracted administrative appeals and litigation arising out of such disputes.”

It appears, the prospect of never-ending battles and litigation spurred the parties to settle with discussions starting in August 2014.

To read more about the case, the “Order Preliminarily Approving Class Action Settlement” and the “Memorandum of Law in Support of Plaintiff’s Unopposed Motion for Preliminary Approval of Class Settlement” are attached for review.

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