Kansas Files Lawsuit Against Aetna for Mismanagement of State Health Plan
Kansas Attorney General Kris Kobach has launched a lawsuit against Aetna Health Inc., Aetna Health Insurance Co., and Aetna Life Insurance Co. This legal action, representing the state's interests, was filed in the Third Judicial District Court in Shawnee County on June 24. The lawsuit responds to allegations regarding Aetna's management and oversight of the State Employee Health Plan, previously under their administration.
Amber Smith, Deputy Attorney General of the Public Protection Unit, emphasized the breach of trust: "Despite its long relationship with the State, Aetna has disregarded its fiduciary duty to the state and misappropriated Kansas funds to pay itself." This statement underscores the state's position on the matter. The lawsuit claims Aetna engaged in "cross-plan offsetting," using Kansas' self-funded insurance program funds to reimburse itself for overpayments to providers under unrelated insurance plans.
The allegations extend to Aetna imposing undisclosed or vague fees on the state for out-of-network employee healthcare services. Smith added that Aetna has presented false claims to the state, thereby wasting taxpayer money while reaping profits. The lawsuit elaborates on incidents like a $200 overcharge being offset by underpaying a state employee's claim, posing financial liabilities such as balance billing risks.
The lawsuit references past cases, including Lutz Surgical Partners PLLC v. Aetna Inc. and Tri3 Enterprises LLC v. Aetna Inc., to substantiate the current claims. Kansas is noted as the first state to litigate against Aetna for allegedly misusing state health plan funds to benefit the plan administrator. Previously, Aetna faced legal action from Arizona concerning antitrust issues with out-of-network claims.
Aetna's contract with Kansas, active since 2018, was not renewed for 2024, with the state instead awarding contracts to Healthy Blue, Sunflower, and United. Aetna, along with CareSource, protested through the Kansas Department of Administration after losing the bidding for the KanCare managed care organization (MCO). Despite the administrative appeal, Kansas officials dismissed the protest, suggesting the issue be addressed with the Kansas Governmental Ethics Commission.
After the protest dismissal, Aetna initiated legal action in August 2024 against several Kansas state departments, contesting the contract decisions. However, their litigation was unsuccessful, and the original contract awards were upheld, reaffirming the selection process's integrity.