Horizon Blue Cross Blue Shield of New Jersey made a preliminary agreement Monday to pay up to $3.6 million -- mostly to plaintiffs lawyers -- to end a class action suit alleging it wrongfully denied claims by eating-disorder patients.
The settlement will, subject to approval by a federal judge, provide about $1.18 million to certain insureds who couldn't get coverage for extended bulimia and anorexia treatments under their Horizon plans.
Horizon would treat future claims more liberally and make internal reforms to resolve disputes over benefits for eating disorders. The reforms would apply to policies held by more than 1 million of its 3.2 million insureds in New Jersey.
And Horizon would pay up to $2.45 million in fees to the plaintiffs class action attorneys, led by Bruce Nagel of Nagel Rice in Roseland, N.J.
Nagel and lawyers for Aetna asked U.S. District Judge Faith Hochberg to approve the settlement in Drazin v. Horizon Blue Cross Blue Shield, Civ. 6-6219. In a joint motion, they said the deal is fair, adequate and reasonable and provides a procedure that would allow claimants to opt out. A companion case, Beye v. Horizon, also would be settled.
The terms are similar to those in a settlement Hochberg approved in October between Aetna Insurance Co. and a class of eating-disorder patients also represented by Nagel.
In both cases, the goal was to get the insurers to treat eating disorders as biologically based mental illnesses (BBMI), such as schizophrenia. That would make eating-disorder patients eligible for months of treatment, compared with what they were getting: a few outpatient visits per calendar year and a few days of inpatient benefits.
Monday's proposed settlement envisions payments to about 500 Horizon insureds who were turned down for extended coverage of eating disorder treatments or who didn't file claims knowing they would be turned down.
During the next four years, Horizon and the company that manages its claims, Magellan Health Services Inc., would be required to submit disputes over coverage to an eating-disorder specialist who would decide whether the claimant's proposed treatment is medically necessary. The specialist's decision would be binding.
The settlement covers only the beneficiaries of fully insured plans -- those funded by employers. Enrollees in self-funded plans, such as employee welfare and state worker health benefits programs, would not automatically benefit from the more liberal process.
Nagel, in a brief supporting the motion for preliminary approval, said that more than 1 million insureds would be covered and that an expert, who was not named, determined that the reforms had a $20 million value.
"This settlement has achieved the core objectives of the litigation: parity status for eating disorders, payment of past denials, and a change in the internal appeals procedures," the brief said.
The motion asked Hochberg to appoint Nagel as class counsel, but it did not say how the fee would be divided between his firm and a firm that also was in the case, Mazie, Slater, Katz & Freeman in Roseland.
