Cigna to Pay $172 Million to Settle Federal Allegation It Overcharged Medicare Advantage Plans

Health insurance giant settles federal lawsuit to resolve allegations it knowingly submitted inaccurate diagnosis codes for its Medicare Advantage customers.
Cigna to Pay $172 Million to Settle Federal Allegation It Overcharged Medicare Advantage Plans
Insurance giant Cigna's headquarters in Bloomfield. (Brad Horrigan/Hartford Courant/TNS)
Caden Pearson

Health insurance giant Cigna has settled a federal lawsuit for more than $172 million to resolve allegations that it knowingly submitted inaccurate diagnosis codes for its Medicare Advantage customers, according to the U.S. Department of Justice.

Federal prosecutors alleged in a lawsuit filed last year that the insurance company violated the False Claims Act by lodging and failing to withdraw claims between 2016 and 2021.

The lawsuit asserted that Cigna manipulated diagnosis codes for Medicare Advantage beneficiaries, inflating its payments from the Centers for Medicare and Medicaid Services (CMS). The program's reimbursement structure involves CMS providing Cigna with a predetermined monthly payment for each enrolled person.

CMS then modifies these monthly payments to accommodate different "risk" factors that influence the anticipated health care expenses for the beneficiary.

According to the DOJ, by submitting inaccurate and untruthful codes, Cigna effectively made its plan members appear sicker than they were, thereby guaranteeing that MA Plans receive higher payments from CMS.

The federal government also alleged that Cigna "did not delete or withdraw these inaccurate and untruthful diagnosis codes," which would have required the insurer to repay CMS. Instead, the DOJ said the company "falsely certified in writing to CMS that the data was accurate and truthful."

"Cigna knew that these diagnoses would increase its Medicare Advantage payments by making its plan members appear sicker,” said Damian Williams, the U.S. Attorney for the Southern District of New York in a statement over the weekend.

“The reported diagnoses of serious and complex conditions were based solely on cursory in-home assessments by providers who did not perform necessary diagnostic testing and imaging."

Medicare Advantage Plans, often referred to as "Part C" or "MA Plans," are offered by private insurers approved by Medicare and cater mainly to Americans aged 65 and older.

The program has become increasingly popular, with over half of the nation's Medicare beneficiaries now enrolled, according to Deputy Assistant Attorney General Michael D. Granston of the Justice Department's Civil Division.

$450 Billion Each Year

The federal government allocates more than $450 billion annually to private insurers to provide health care coverage through these plans, he said.

“Given the growth of Medicare Advantage plans, investigating fraud involving Medicare Part C is more important than ever. My office has prioritized combatting Medicare Advantage fraud, including applying data-driven investigative methods and working extensively with our law enforcement partners across the country,” said U.S. Attorney Jacqueline C. Romero of the Eastern District of Pennsylvania.

The federal government further alleged that Cigna submitted diagnosis codes to CMS based solely on assessments from vendors contracted by the company, usually nurses, during in-home visits. These assessments often lacked necessary tests, treatments, and supporting documentation, according to the DOJ, yet Cigna used them to claim higher payments from CMS, falsely certifying their accuracy.

The allegations against Cigna also included instances where the insurer reported diagnosis codes for morbid obesity without medical records showing the required Body Mass Index (BMI) above 35, a critical criterion for this particular diagnosis code.

Cigna said in a statement that it settled to avoid “the uncertainty and further expense" of a long-running legal dispute.

Additionally, the insurer committed to entering into a five-year Corporate Integrity Agreement (CIA) with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).

This agreement requires Cigna to implement stringent accountability and auditing measures, including annual certifications by top executives and board members, risk assessments, and multi-faceted audits focused on risk adjustment data.

This settlement comes amid ongoing legal challenges for Cigna, including a class-action lawsuit accusing the company of utilizing the PxDx algorithm to deny certain medical claims and reduce labor costs by decreasing doctors' review time for each claim. The lawsuit alleges that this system prioritizes cost savings over patient care.