CRITTENDEN REGIONAL HOSPITAL: Lawsuit alleges the hospital, closing this week, failed to cover the health insurance claims of employees, despite withholding premiums from paychecks.
A lawsuit filed on Friday in the Circuit Court of Crittenden County alleges that at least beginning in 2014, Crittenden Regional Hospital
(CRH) withheld money from employees' paychecks for health insurance premiums, but never actually paid the claims. That would potentially leave their employees on the hook for tens of thousands of dollars in medical care they were told was covered by their health insurance. The practice may have dated back even further, said Denny Sumpter
, the attorney for the plaintiffs.
Long suffering from financial problems, CRH closed today and is preparing to enter a Chapter 7 bankruptcy process
Sumpter's mother, Deloris Sumpter, was a CRH employee for 36 years, working in the medical records department. According to Sumpter, the employees, who have been laid off this week, were told at a meeting last week that no health insurance claims would be paid for 2014, despite the fact that employees had paid monthly premiums and health-care providers had been told that the employees were covered. Employees were told that claims would be paid through the end of 2013, according to Sumpter.
In the case of Sumpter's mother, she had around $28,000 that had ostensibly been billed to the insurance plan from January on. She was now being told that she would be on the hook, despite the fact that CRH withheld premiums from her paycheck throughout 2014. Sumpter filed suit with his mother (and father, who was covered by the same plan) as plaintiffs. The suit will expand to a class-action lawsuit; Sumpter is currently representing around 50 others who will be added as plaintiffs, all of whom paid their premiums but have had none of their 2014 claims paid for, according to Sumpter.
To be clear, the lawsuit pertains not to co-pays and deductibles and the like — the employees' portion of the bill — but specifically to the portion of the bill that the insurance plan promised to cover.
CRH was self-insured (governed by the Employee Retirement Income Security Act of 1974, or ERISA, and regulated by the federal Department of Labor), using a third party to administer the health insurance plans to employees. Starting in January of 2014, CRH brought in a new third-party administrator, CIGNA
. According to Sumpter, he plans to present evidence that CRH collected premiums from employees throughout the year but never paid anything to CIGNA, the entity which would pay the claims.
"They didn’t send a single dime," Sumpter said. "CIGNA would tell the provider, 'Yeah, they’re covered.' They’ve been doing this this whole time."
If that allegation is true, all those premiums that were collected from employees weren't used to cover the cost of the health insurance plans at all — money was withheld from paychecks with no actual benefit. And the hospital allegedly never contributed its portion of the premium.
The lawsuit alleges that the hospital committed "grossly negligent acts" and "breach of fiduciary duty" and that CIGNA "failed to notify Plaintiffs that their claims under the place would not be paid because the plan had not been adequately funded" by the hospital.
Named defendants in the lawsuit are the Crittenden Hospital Association, Cigna, hospital CEO Gene Cashman and hospital board president David Raines.
Cashman did not return a call requesting comment. A spokesperson for Cigna sent an email: "Cigna doesn't comment on pending litigation, and any questions related to the hospital's self-funded benefit plan should be directed to the hospital."
Sumpter said that he is hoping that the lawsuit's discovery process will turn up more information about whether CRH failed to pay claims in previous years, when a different third-party administrator was used. According to Sumpter, he has already gathered evidence that the payment of claims in previous years was chronically late, such that some employees were turned over to collections for the portion of bills that the insurance plan was supposed to cover. For example, his mother has more than $70,000 in claims predating 2014 that have not yet been paid.
"The most frustrating part of this is that if the hospital was out of money, all they had to do was tell the employees in January they were terminating their plan and everybody could have gone and gotten health insurance," Sumpter said. "The harm that's resulted in not being forthright with the employees is so much greater than the harm that would have come to them if they would have just been honest. ... It just makes no sense that you would collect somebody’s premiums and not cover them. If your bill is not paid, you're not covered. It's akin to theft."