Cigna 2008 Annual Report Download - page 156

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Broker compensation. Beginning in 2004, the Company, other insurance companies and certain insurance brokers received subpoenas
and inquiries from various regulators, including the New York and Connecticut Attorneys General, the Florida Office of Insurance
Regulation, the U.S. Attorney’s Office for the Southern District of California and the U.S. Department of Labor relating to their
investigations of insurance broker compensation. CIGNA is cooperating with the inquiries and investigations.
On August 1, 2005, two CIGNA subsidiaries, Connecticut General Life Insurance Company and Life Insurance Company of North
America, were named as defendants in a multi-district litigation proceeding, In re Insurance Brokerage Antitrust Litigation,
consolidated in the United States District Court for the District of New Jersey. The complaint alleges that brokers and insurers
conspired to hide commissions, increasing the cost of employee benefit plans, and seeks treble damages and injunctive relief.
Numerous insurance brokers and other insurance companies are named as defendants. In 2008, the court ordered the clerk to enter
judgment against plaintiffs and in favor of the defendants. Plaintiffs have filed an appeal. CIGNA denies the allegations and will
continue to vigorously defend itself.
Amara cash balance pension plan litigation. On December 18, 2001, Janice Amara filed a class action lawsuit, now captioned
Janice C. Amara, Gisela R. Broderick, Annette S. Glanz, individually and on behalf of all others similarly situated v. CIGNA
Corporation and CIGNA Pension Plan, in the United States District Court for the District of Connecticut against CIGNA Corporation
and the CIGNA Pension Plan on behalf of herself and other similarly situated participants in the CIGNA Pension Plan affected by the
1998 conversion to a cash balance formula. The plaintiffs allege various ERISA violations including, among other things, that the
Plan’s cash balance formula discriminates against older employees; the conversion resulted in a wear away period (during which the
pre-conversion accrued benefit exceeded the post-conversion benefit); and these conditions are not adequately disclosed in the Plan.
In 2008, the court issued a decision finding in favor of CIGNA Corporation and the CIGNA Pension Plan on the age discrimination
and wear away claims. However, the court found in favor of the plaintiffs on many aspects of the disclosure claims and ordered an
enhanced level of benefits from the existing cash balance formula for the majority of the class, requiring class members to receive
their frozen benefits under the pre-conversion CIGNA Pension Plan and their accrued benefits under the post-conversion CIGNA
Pension Plan. The court also ordered, among other things, pre-judgment and post-judgment interest. The court has stayed
implementation of the decision until the parties’ appeals have been exhausted. Both parties have appealed the court’s decisions. In
the second quarter of 2008, the Company recorded a charge of $80 million pre-tax ($52 million after-tax), which principally reflects
the Company's current best estimate of the liabilities related to the court order. The Company will continue to vigorously defend itself
in this case.
Ingenix. On February 13, 2008, State of New York Attorney General Andrew M. Cuomo announced an industry-wide investigation
into the use of data provided by Ingenix, Inc., a subsidiary of UnitedHealthcare, used to calculate payments for services provided by
out-of-network providers. The Company received four subpoenas from the New York Attorney General’s office in connection with
this investigation and responded appropriately. On February 17, 2009, the Company entered into an Assurance of Discontinuance
resolving the investigation. In connection with the industry-wide resolution, the Company will contribute $10 million to the
establishment of a new non-profit company that will compile and provide the data currently provided by Ingenix. In addition, on
March 28, 2008, the Company received a voluntary request for production of documents from the Connecticut Attorney General’s
office seeking certain out-of-network claim payment information. The Company is responding appropriately.
The Company is also a defendant in two putative class actions (Franco et al. v. Connecticut General Life Insurance Co., CIGNA
Corporation and CIGNA Health Corporation and Chazen et al. v. Connecticut General Life Insurance Co., CIGNA Corporation and
CIGNA Health Corporation) brought on behalf of members and one putative class action brought on behalf of providers (AMA et al. v.
Connecticut General Life Insurance Co.) asserting that due to the use of Ingenix data, the Company improperly underpaid claims, an
industry-wide issue. The Franco putative class action filed on March 22, 2004 in federal district court in New Jersey asserts claims
under ERISA and the RICO statute on behalf of members of CIGNA plans. Plaintiff seeks to recover alleged underpayments in
relation to out-of-network claims for the period from 1998 to present. In 2008, the court denied the Company’s motion to dismiss for
lack of standing while indicating that the named plaintiff’s unique situation might undermine her adequacy as a class
representative. The parties are conducting significant discovery, and we expect the class certification hearing to occur in the second
quarter of 2009. On August 15, 2008, the same counsel that filed the Franco case, filed a second putative class action in the same
court as the Franco case on behalf of a different class representative, David Chazen, in order to address potential issues regarding
Franco’s adequacy as a class representative. The alleged damages period in the Chazen case encompasses 2002 to present. On
February 9, 2009, the same counsel that filed the Franco case, filed a third putative class action in the same court as the Franco case
on behalf of providers. The alleged damages period in the AMA case encompasses 2005 to present. The Company denies the
allegations asserted in the investigations and litigation and will vigorously defend itself in these matters.