January 24, 2013

162017_132140396847214_292624_nA class-action lawsuit was filed against the University of Pennsylvania Medical Center (“UPMC”) and the largest health insurance carrier in the area, Highmark, alleging that their actions inflated health care costs to patients by improperly using their market dominance in the geographic area serviced by them. The parties had reached a settlement that would have made a $4.5 million payment to the plaintiffs’ attorneys and would have supplied the plaintiffs’ attorneys with documents in support of their continuing claims that UPMC used its immense market power that caused ratepayers to pay more than they would have otherwise.

The settlement reached among the parties had been scheduled for a hearing before a federal judge on January 18, 2013, to approve the terms of the settlement. Instead, the plaintiffs’ attorneys filed a motion on January 18, 2013 seeking to withdraw from the settlement because, they allege, Highmark misrepresented that its promise in the settlement agreement to maintain its low-cost Community Blue health insurance product, based on documents that UPMC filed under seal in the case on January 17, 2013. The UPMC documents reportedly revealed to the plaintiffs that Highmark “was already bound to reintroduce the Community Blue insurance product prior to the execution of the [settlement] Agreement, contrary to Highmark’s express warranty.”

One of the plaintiffs’ attorneys has stated, “It appears that the covenants regarding the reintroduction of Community Blue that we believed Highmark exchanged for a release of the Class’s claims were entirely illusory and in direct contravention of Highmark’s representation that the terms of the settlement are ‘new undertakings and not otherwise binding upon it as pre-existing obligations.'”

In initially seeking approval of the settlement, the plaintiffs’ attorneys had represented to the court that the settlement provisions would have promptly provided millions of dollars of savings to ratepayers, that Highmark would agree to not provide some health care providers with higher reimbursements than others through 2014, which would result in greater competition in the marketplace, and that Highmark agreed to continue its Community Blue product, which Highmark had represented to the plaintiffs was a new agreement and not a pre-existing obligation. The plaintiffs’ attorney seek to withdraw from the settlement because the settlement provisions allegedly would not provide significant benefits to ratepayers. Highmark did not have an immediate response to the plaintiffs’ attorneys’ motion to withdraw from the settlement; Highmark has until January 28, 2013 to file a response.

The same federal judge who is assigned to the case and was scheduled to hear the request for approval of the settlement is also the judge in similar cases: one case involves a regional health system alleging that UPMC unlawfully sought to stifle competition and another involves UPMC’s claims that Highmark allegedly used unlawful means in an attempt to siphon business from UPMC.


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