Humana Charged in Racketeering Case

WASHINGTON —  Humana Inc., a provider of health-care coverage to more than 6 million people, was accused Monday in a racketeering lawsuit of failing to tell customers that cost greatly influenced health coverage decisions.

The 70-page complaint alleges that Humana failed to disclose financial incentives it offered to doctors, other health-care providers and claims reviewers to deny coverage and told subscribers that medical necessity was the sole basis for such decisions.

The lawsuit, which seeks class-action status, is the first of a half-dozen that lawyers, including some who gained high profiles in litigation against tobacco companies and Microsoft Corp., plan in coming weeks to challenge coverage decisions of managed-care health insurers. Shares of Humana and other insurers have fallen under threat of the proposed litigation.

“It’s just an open-ended liability,” said William McKeever, a health insurance analyst at Paine-Webber. “Right now, people don’t care about the fundamentals” of managed-care companies.

Humana shares fell 6 cents to close at $7 on the New York Stock Exchange. Shares of the three largest managed-care companies also fell. No. 1 Aetna Inc. fell $1.56 to close at $49.69, United Healthcare Corp. fell $3.50 to close at $42.25, and Cigna Corp. fell $3.94 to close at $75.50. All trade on the NYSE.

Louisville, Ky.-based Humana said it hadn’t seen the lawsuit and wouldn’t comment.

The lawsuit, filed in U.S. District Court in Miami on behalf of Humana subscribers, comes as the House of Representatives prepares to take up legislation that would expand patients’ right to sue their managed-care plans under state malpractice laws. California Gov. Gray Davis last month signed legislation that would allow patients to sue their health-care provider.

It also comes as the U.S. Supreme Court decides how to deal with several HMO suits on its docket. On Monday, the justices signaled interest in a case involving the largest health insurer, Aetna, and last week the court agreed to consider a case that accused an Illinois HMO of putting profit ahead of patient care.

The lawsuit filed Monday seeks triple damages under the Racketeer Influenced and Corrupt Organizations Act, or RICO.

Plaintiffs, including two Riviera Beach, Fla., police officers, complained that Humana concealed from its customers “that it has established a series of financial incentives for claims reviewers--including direct cash bonus payments--designed to encourage denial of claims without regard to medical needs of patients.”

“There has been this widespread and willful failure to disclose that cost was the overwhelming factor in making health-care decisions, said Joseph Sellers, a Washington attorney who represents the plaintiffs.