Medicare Advantage update: Court rejects Humana’s request for class certification

December 17, 2014 / 6 min read

In the case In re Avandia, MDL No. 1871, 2014 WL 6684343 (E.D. Pennsylvania, Nov. 24, 2014),¹ the United States District Court denied Humana’s request for class certification regarding those Medicare Advantage Plans (MAP) with unresolved lien recovery claims.

In rejecting this request, the court found that Humana failed to meet the various requirements and criteria for class certification under Rule 23 of the Federal Rules of Civil Procedure.

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This interesting new case can be broken down as follows:

Background

To help better assess the court’s ruling, some historical background is in order.

The Avandia case arises from the settlement of thousands of personal injury claims filed against GlaxoSmithKline (GSK), the manufacturer of the diabetes medication Avandia. In relation to these settlements, Humana, a Medicare Advantage plan, pursued lien recovery against GSK seeking reimbursement of medical expenses it paid for its enrollees.

A dispute developed regarding whether Humana had standing to sue to enforce its recovery claims under the Medicare Secondary Payer’s (MSP) private cause of action statute. This dispute ultimately made its way to the U.S. Court of Appeals for the Third Circuit.

In 2012, the Third Circuit ruled in favor of Humana – holding that Humana did in fact have standing to sue GSK for reimbursement under the MSP’s private cause of action provision.

Current Dispute

The latest dispute in this case stems from events that have transpired after the Third Circuit’s 2012 ruling – namely, the steps GSK has taken to reimburse MA lien claims and those MA lien claims that remained unresolved.

Since the 2012 ruling, GSK has undertaken a variety of measures to identify and reimburse potential MA lien claims. ² For example, GSK has negotiated with MA plans on an individual and group basis, and has been setting aside a portion of each settlement to make sure that any MA lien claims are addressed.

In addition, GSK has participated in private lien resolution programs (PLRPs). As part of these PLRPs, the Special Avandia Master recommended, and the court approved, a specially created court PLRP for those MA plans with outstanding lien claims. These MA plans were contacted and offered to join the court PLRP. Some of these plans decided to join, while others decided to negotiate outside the court PLRP.

In addition, there was another group of about 94 MA plans which, despite being notified of the court PLRP, had not taken any action at all with respect to their potential lien claims. It is this group which became the focus of Humana’s class certification attempt.

Humana Seeks Class Certification

In this case, Humana asked the District Court to grant class action status regarding those MA plans that: (1) had not elected to participate in a PLRP; and (2) had elected to participate in the PLRP, but the settling claimant opted to resolve any lien claim outside of the program.

As part of this request, Humana argued that class certification was proper since GSK had not (allegedly) taken sufficient measures to ensure that these outstanding MA lien reimbursement claims were being adequately addressed. Humana argued further that class certification would help facilitate efficient resolution of these unresolved claims.

How Did the Court Rule?

The District Court ruled against Humana and denied its Motion for Class Certification. In rejecting Humana’s request, the court found that Humana failed to meet the requirements for class certification under Rule 23.

A complete analysis of the court’s very extensive discussion and technical breakdown of Rule 23 is outside the scope of this article. However, in general, the court rejected Humana’s request on the following grounds:

The court did not believe, as required under Rule 23, that the common questions of law and fact pertaining to the purported class predominated over questions affecting only individual members of the class.

In reaching this conclusion, the court noted that the central legal question of whether MA plans had standing to sue to enforce their recovery claims had already been resolved in the court’s 2012 ruling. Further, it was noted that GSK had conceded its primary payer status upon claim settlement.

The court also rejected Humana’s argument that GSK’s steps to address and reimburse potential MA lien claims were inadequate. Specifically, the court noted the various measures that GSK had undertaken to identify and settle potential lien claims.
The court rejected Humana’s contention that GSK’s failure to withhold 100% of the settlement funds until MA lien claims were resolved established liability against GSK. In this regard, the court found that Humana failed to produce any evidence that GSK was required to hold back 100% of the settlement under the MSP.

The court also rejected Humana’s argument that the court should decide, on a class-wide basis, whether the percentage of funds being held back by GSK was sufficient. On this point, the court found that merely demonstrating that the common set-aside percentage may be insufficient in one instance, did not establish liability class-wide. As such, the court noted that it would need to conduct an “individualized factual inquiry” of each settlement to make this determination.
The court found that class certification was not the superior method to address the outstanding MA lien claims.

Here, the court looked at several factors noting, for example, that the subject MA plans had not elected to participate in the PLRPs which the court viewed as suggesting that they “may prefer to make individualized decisions with regard to whether and how to pursue their rights under the MSP Act, rather than having their liens resolved on a class-wide basis through a representative plaintiff.”

Further, the court noted that there was no evidence that the type of discovery that needed to be performed would be more efficient as part of a class action.
The court also rejected Humana’s argument that the subject MA plans, which had smaller enrollee numbers, may be deterred from asserting claims if they felt pursuing such claims would not be worth it. Regarding this argument, the court observed that insurers often take legal action to enforce subrogation rights, regardless of the size or amount at issue. Further, the court found no evidence suggesting the MA plans in this case would be deterred from pursuing their rights in the absence of a class action.

Weighing all these factors together, the court ruled that Humana failed to meet the Rule 23 criteria for class certification. When the dust settles, this means that those MA plans with outstanding lien claims will need to pursue their recovery actions against GSK on an individual basis.

¹ The full name of this case is styled as In re Avandia Marketing, Sales Practices and Product Liability Litigation. This case is also commonly referred to as Humana Medical Plan, Inc. v. GlaxoSmithKline, LLC.

² The court also noted that GSK had actually been setting aside settlement funds to reimburse MA lien claims even while it was challenging Humana’s standing to sue for reimbursement.