Nevada Health Plan Members Win $11.9 Million After Decade-Long RICO Battle with Humana

In the mid-1980s, Humana Health Insurance of Nevada issued group health policies promising to cover 80% of hospital charges, leaving members responsible for the remaining 20% co-payment. What members did not know was that Humana had also negotiated undisclosed discounts with Sunrise Hospital ranging from 40% to 96% off the insurer's portion of those same charges. The practical effect was stark: Humana paid far less than its contractual 80% share, while the covered employees and their families paid far more than the 20% they had agreed to.

In 1989, Mary Forsyth and a class of Nevada co-payors filed suit in federal court in Nevada, Case No. CV-S-89-249, asserting that the concealed discount arrangement amounted to mail and wire fraud giving rise to RICO liability, and that it also violated federal antitrust law. W.B. Markovits, then of Markovits and Greiwe and now of Markovits, Stock and DeMarco, was among the counsel of record for the plaintiffs, working alongside Nevada trial counsel and appellate specialists through the appeals.

The case produced years of hard-fought pretrial rulings. The district court granted summary judgment for Humana on most claims in 1993. The Ninth Circuit reversed on both the co-payors' RICO count and the Sherman Act antitrust claims in 1996 and again in 1997 after a successful petition for rehearing, returning the litigation to the district court with the core fraud theory intact.

Humana then sought Supreme Court review on a threshold question: did the McCarran-Ferguson Act, which generally protects state insurance regulation from federal override, bar the plaintiffs' RICO claims entirely? In January 1999 the Court ruled unanimously in the plaintiffs' favor. Because applying RICO to Humana's alleged conduct would not frustrate Nevada's articulated insurance policies or disrupt its regulatory scheme, the act offered Humana no shelter from federal fraud liability.

With that ruling in hand and the RICO and antitrust claims viable, the parties reached a class settlement in 1999. Under the terms reported at the time, the co-payor class of roughly 13,000 patients who had been hospitalized at Sunrise recovered $11.9 million, the employer premium-payor class recovered $4.1 million, and the defendants separately paid court costs and the plaintiffs' attorneys' fees. The litigation had lasted a decade from filing to resolution.