Auto supplier wins U.S. court appeal over health insurer for hidden fees

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DETROIT -- A Michigan auto supplier won a federal court appeal over a health insurer in a $6 million dispute over hidden fees charged to self-insured clients.

The 6th U.S. Circuit Court of Appeals on Wednesday ruled in favor of Hi-Lex Controls Inc., a Litchfield, Mich.-based maker of window regulators with an automotive design center in suburban Detroit, over Blue Cross Blue Shield of Michigan.

The appellate court in Cincinnati upheld a U.S. District Court judgment last June in favor of the supplier.

The appeals court had sided with U.S. District Judge Victoria Roberts, who found that Blue Cross had used a deceptive practice to hide fees and surcharges that were rolled into claims billed under administrative services contracts with self-insured businesses and local governments.

"(Blue Cross) also gave a misleading response to a request for proposal issued by Hi-Lex by denying that it charged 'access fees,'" the appellate ruling states. "This response helped helped sustain the illusion that (the insurer) was more cost-competitive than other (third party administrators) who responded to the (request)."

Administrative services contracts allow self-insured employers, retirement funds, unions and other organizations to use Blue Cross' network and administrative services to process insurance claims.

Roberts had previously found Blue Cross had concealed four fees in billing statements to Hi-Lex for employee benefit claims -- a network access fee, a contribution to the Blues' contingency reserve, a retiree coverage surcharge and an "other-than-group fee" that helped subsidize its Medigap coverage plan for senior citizens.

The insurer has said previously that its Hi-Lex contract language is identical to a similar agreement it maintained for a self-insured county government. That county obtained a $1.14 million judgment in 2011 in its own lawsuit against Blue Cross, but the Michigan Court of Appeals the following year reversed that judgmentin the insurer's favor.

"Blue Cross Blue Shield of Michigan is disappointed in the decision in federal court, which runs contrary to state court rulings over the same contract language," Blue Cross Director of Corporate Communications Helen Stojic said in a statement.

"We are reviewing the decision for appeal. The access fees under dispute enabled Hi-Lex to receive substantial discounts in hospital services, which resulted in millions of dollars of savings in hospital costs for Hi-Lex."

"We are very happy that the judgment was affirmed," said Hi-Lex attorney Perrin Rynders of Grand Rapids, Mich.-based Varnum LLP. "It's been a long time coming, but we never doubted that this would be the ultimate outcome … litigation was not our client's preferred approach, but (the Blues) refused at every turn to accept responsibility for its actions."

Varnum has brought more than 30 lawsuits in U.S. District Court in Detroit on behalf of various self-insured companies, including Hi-Lex, but the other pending cases were under a stay to await the outcome of Hi-Lex's appeal.

You can reach Chad Halcom at chalcom@crain.com.


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