Cohen, Milstein, Hausfeld & Toll and Berger & Montague Announce Class Action Lawsuit Against Magellan Health Services.

Business Editors & Legal Writers

ST. LOUIS--(BUSINESS WIRE)--Oct. 27, 2000

Nationwide Class Action Filed Against Magellan Health Services 

for Failing to Provide Promised Behavioral Health Services

Yesterday the law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C., and Berger & Montague, P.C., two of the nation's top plaintiffs' law firms, filed nationwide class action law suits against Magellan Health Services, Inc., the largest specialty managed care organization in the country and its subsidiary Magellan Behavioral Health, Inc.

Magellan is a nationwide health care organization that manages mental health and substance abuse services for 70 million Americans. The suits were brought on behalf of beneficiaries whose behavioral health benefits were provided, underwritten, and/or managed by Magellan. Both cases were filed in the U.S. District Court for the Eastern District of Missouri.

Millions of Americans confront a national crisis -- as well as a personal crisis -- when they need treatment for mental illness or substance abuse. Less than one-third of adults in this country with a diagnosable mental disorder actually receive treatment in a given year. The most commonly cited reason for not receiving treatment is cost.

Although they have purchased health insurance policies that expressly cover treatment for mental illness and substance abuse where such treatment is "medically necessary," many policyholders discover they can't obtain the treatment their doctors say is necessary, because insurance companies and their claims reviewers won't approve it and won't pay for it. Disregarding the orders of treating physicians, insurance company claims reviewers determine that the treatment prescribed does not meet the insurer's undisclosed cost-based criteria and therefore the claims will not be paid. As a result, policyholders wind up paying more for their behavioral health care coverage than they would have if the insurers had truthfully detailed the coverage that actually would be provided.

The law suits claim that policyholders have paid more money for less coverage -- not to mention the fact that when policyholders discover they do not have the coverage that was represented to them, many go without needed treatment. Unfortunately without proper care, some of the policyholders have been known to commit crimes, lose their jobs, have accidents and even commit suicide.

Magellan takes in annual revenues of $1.9 billion. Magellan makes profits by keeping the difference between the premiums paid for promised coverage and the cost of coverage actually provided and by managing behavioral health care services for employers and insurers to keep utilization as low as possible to save money.

The complaint alleges that Magellan achieves "savings," and makes profits, by engaging in a variety of practices, including: (1) imposing cost-based restrictive criteria to limit approvals of coverage; (2) providing financial incentives to physicians not to recommend covered services; (3) pressuring claim reviewers to deny claims; (4) instituting unreasonable approval and appeal requirements to prevent, discourage and delay policyholders from attaining their right to coverage under the terms of their policies; and (5) arranging to profit directly from under-treatment by assuming the role of an insurance company, not merely a claims processor.

The law suits state that none of these practices are disclosed adequately to policyholders. To the contrary, Magellan, along with the insurance companies and other entities that utilize Magellan, represent that they will provide and pay for broad coverage for medically necessary treatment.

Cohen, Milstein, Hausfeld & Toll, P.L.L.C., and Berger & Montague, P.C. regularly litigate plaintiffs' class actions, particularly health care cases, consumer protection and product liability class actions, civil rights and employment discrimination cases, antitrust, securities and business class actions, and environmental toxic tort actions. Both firms are currently involved in a number of class action lawsuits against Humana, Blue Cross Blue Shield and Prudential. The respective complaints may be found on the individual firm's websites at www.cmht.com and www.bm.net.