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Conn. medical society sues to block United-Health Net deal

The group claims the state's insurance commissioner didn't give proper weight to evidence that the transaction would hurt physicians and members.

By Emily Berry — Posted Feb. 1, 2010

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The Connecticut State Medical Society has challenged state Insurance Commissioner Thomas Sullivan's decision to approve a deal that would allow Health Net to sell its membership base to a subsidiary of UnitedHealth Group. Sullivan's counterparts in New York and New Jersey also signed off on the arrangement, which would allow Health Net to leave the Northeast market, business that has been less profitable than its West Coast operations.

United gets renewal rights to Health Net's membership for $350 million up front and as much as an additional $280 million over the next two years, depending on how many of Health Net's 578,000 members in the Northeast end up covered by United.

In a lawsuit filed Jan. 19 in state Superior Court, the Connecticut medical society, as well as its president and council chair individually, claim that Sullivan approved the deal without considering evidence brought forward by opponents, and that a public hearing on the issue was conducted in a biased manner.

Sullivan gave his approval to the deal Dec. 2, 2009, following the hearing officer's recommendation dated Dec. 1, 2009. Those approvals were issued just a few business days after the Nov. 23, 2009, hearing.

The American Medical Association also opposed the deal. Henry Allen, senior attorney for the AMA's Private Sector Advocacy unit, spoke at the public hearing and submitted written comments outlining how the transaction would narrow an already concentrated health insurance market in Connecticut.

CSMS President Kathleen LaVorgna, MD, a general surgeon from Norwalk, Conn., said the officials conducting the hearing seemed eager to get past any testimony opposing the deal. "I felt it was very cursory, the amount of time they gave us," she said. "And we provided them with hundreds of pages of written documentation ... We felt that in a sense of fair play, perhaps all the information we provided had not been looked at."

The lawsuit alleges that "the findings of the hearing officer, commissioner and the department are unsupported by law and fact, are arbitrary, capricious and represent an example of a 'rubber stamp' analysis at best."

Insurance department spokeswoman Dawn McDaniel said in a statement, "Our lawyers are in the process of reviewing the lawsuit. We expect that the attorney general will represent us vigorously."

Health Net deferred comment on the lawsuit to United. United spokesman Daryl Richard declined to address the lawsuit directly, but said in a statement that "UnitedHealthcare thinks this is a good transaction because it broadens choice and access to quality care for Connecticut residents. We will ensure a smooth transition process for customers, as well as for physicians, hospitals and other health care professionals, many of whom are already in UnitedHealthcare's network."

CSMS Executive Vice President Matthew Katz said physicians' concern over the deal stems from its unusual structure -- not an outright purchase of membership, but of renewal rights, which they worry will allow United to offer coverage only to the Health Net members it believes would be most profitable.

The unusual terms also raise the question of whether United has a right to access personal health records of Health Net members, because it has not guaranteed it will renew all of those policies. Reviewing the records would allow United to cherry-pick the healthiest members and decline to renew coverage for the rest, the medical society argues.

CSMS has asked Connecticut Attorney General Richard Blumenthal and federal officials to investigate whether Health Net is violating Health Insurance Portability and Accountability Act privacy rules in giving United those health records.

In a Jan. 20 letter to authorities at the U.S. Dept. of Health and Human Services, CSMS noted that the terms of the transaction ensure that United has complete access to medical records of Health Net members, but no standards are set for how United will use or maintain those records. Neither Blumenthal, who received a letter Jan. 19, nor HHS has decided whether to take up an investigation.

United has given no indication of how it will choose which Health Net policies it will offer to renew.

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