Did Cigna Deserve its $172M Penalty?

Did Cigna Deserve its $172M Penalty?


After Cigna agreed to pay $172 million to resolve allegations that it violated the False Claims Act in its Medicare Advantage plans, it begs this question: Is the insurer deserving of this penalty? One industry expert believes this is only a small part of what MA plans owe in penalties to CMS, while another believes there needs to be more clarity from the government.

CMS pays MA plans a fixed monthly amount for each beneficiary enrolled in their plans, and then adjusts those payments based on “risk” factors that affect the member’s health expenditures. This makes sure that MA plans receive more payment for members who have higher healthcare costs and less payment for those who have lower healthcare costs. CMS makes these adjustments by collecting risk adjustment data, which includes medical diagnosis codes from MA plans.

The federal government alleges that Cigna “submitted inaccurate and untruthful patient diagnosis data to CMS in order to inflate the payments it received from CMS, failed to withdraw the inaccurate and untruthful diagnosis data and repay CMS, and falsely certified in writing to CMS that the data was accurate and truthful.” The $172 million settlement, announced Saturday, resolved these allegations and the insurer admitted to wrongdoing.

As part of the settlement, Cigna has entered into a five-year Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General. This requires Cigna to implement several accountability and auditing provisions.

“We hold ourselves to high standards for serving Medicare beneficiaries and all of our customers, and are constantly evaluating and evolving our processes accordingly,” said Chris DeRosa, president of Cigna Healthcare’s U.S. government business, in a statement.

The submission of inaccurate diagnosis codes is a common practice among MA insurers, according to Dr. Richard Gilfillan, a family practitioner, former CEO of Trinity Health System and former deputy administrator of CMS.

“Cigna admitted to doing what most MA Plans did – submit every possible diagnosis code, without regard to its accuracy, to get more money from CMS,” Gilfillan said in an email.

Meanwhile, one insurer is convinced that the government is wrong to try and recoup money it has paid MA insurers. Take the Humana v. Becerra suit (Becerra is the U.S. Secretary of Health and Human Services). Humana sued the government for CMS’ final rule on the Medicare Advantage Risk Adjustment Data Validation program, which aims to recoup money from MA plans for overpayments. The insurer industry association AHIP has also spoken out against this. In UnitedHealthcare v. Becerra, the insurer challenged CMS’ Overpayment Rule, which requires MA plans to return overpayments to CMS within 60 days.

These efforts show that “the entitled MA industry believes it should be paid more even when they know a diagnosis is wrong despite the Supreme Court’s rejection of this argument in UnitedHealthcare vs. Becerra,” Gilfillan charged.

However, another expert seems to believe that Cigna’s situation is less a case of outright fraud than a lack of clarity on the rules.

“The issue with risk adjustment right now is that the government has been interpreting their rules and standards in different ways, even though the rules and standards never changed. … HHS, OIG and CMS don’t even agree on the interpretation. So as health plans, there’s a lot of gray space,” said Kathleen Faulk, who was previously senior vice president and general manager of government programs at Cambia Health Solutions and regional president of Humana.

One area where there is gray space is where Cigna was charged with not withdrawing unsubstantiated codes, Faulk said.

“There’s nothing that says we have to open charts to validate the code is legitimate and that the doctor documented everything perfectly,” she said.

The cases are being litigated, but in the meantime, does this settlement signal the need for additional oversight of MA plans? Gilfillan said that the “fraudulent coding” Cigna admitted to is “only a small driver of the estimated $73 billion [in] annual overpayments to MA Plans.” 

“Even when codes are accurate, the flawed design of the current system allows MA plans to collect massive overpayments by making their patients look sicker than they are,” he said. “CMS modified this somewhat with important changes in the Final 2024 Rule but the coding opportunity remains an important source of overpayments. CMS needs to create a different risk adjustment system that eliminates the potential for diagnostic code gaming.”

Faulk, meanwhile, said that there isn’t necessarily a need for “more scrutiny and oversight.” Instead, the government needs to “make it a level playing field for all [MA] health plans, be clear on what’s allowed and what isn’t.”

Photo: Bet_Noire, Getty Images



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