N.C. Baptist Hospital tentative settlement approved

The more than 14,000 participants in a class-action federal lawsuit involving N.C. Baptist Hospital should learn by Nov. 15 how much settlement money they may be eligible to receive.

Judge James Beaty Jr. on Friday approved a preliminary settlement of $5.38 million and a timeline toward a final fairness hearing on 10 a.m. Feb. 24. The hearing gives plaintiffs an opportunity to object to the terms of the settlement.

The agreement represents a potential conclusion of a lawsuit filed in January 2009 involving MedCost, which Baptist co-owns with Carolinas HealthCare System.

Baptist and certain affiliates' group health plans have been accused of requiring employees to pay more in fees for health benefits than other corporate clients pay.

The lawsuit said Baptist "violated the duties, responsibilities and obligations imposed upon them as a fiduciary" under the federal Employee Retirement Income Security Act. ERISA prohibits most employers from using companies they own to provide health benefits for employees unless they can show they are putting workers' interests first.

Baptist agreed at a July 28 hearing to pay the $5.38 million — which includes $438,500 in plaintiffs' attorney fees — to settle the lawsuit.

The lawsuit involves current and former employees and their families. Those eligible for the settlement participated in the plan from March 6, 2002, to May 7, 2009. Plan participants made contributions of $9 million to $13 million a year beginning in March 2002, the lawsuit said.

Baptist said it is establishing a website to disclose how much each class-action participant will receive from the $4.14 million estimated to be left in the settlement fund once all attorney fees are paid. The website is supposed to be available by Nov. 15, the same date notifications are supposed to be sent out.

The five primary plaintiffs will receive $4,000 in compensation from the settlement.

How much compensation that class members could receive is based on several factors: the amount of time they were enrolled in the plan; which year or years they were enrolled; which benefits package they chose (prime or select); whether they had an employee or family plan; the amount of the settlement allocated to the applicable year or years; and the premium amount they paid into the plan each year.

Baptist has denied any wrongdoing. It said the selection of MedCost was a plan-sponsor function, not a fiduciary function, and therefore its actions were not governed by ERISA.

"NCBH alleges that cost is only one factor in a prudence analysis, and that MedCost provided superior service or capabilities in other areas that justified any increase in cost," Baptist said in June 2009.

However, according to the agreement, the plaintiffs' attorneys "obtained reliable documentary evidence to suggest that NCBH had a history of 'self-dealing' with its subsidiary provider network. Indeed, that evidence indicated NCBH was even offering better pricing to outside health plans that used the MedCost network than it was offering its own plan and own employees."

Friday's hearing addressed the second phase of the settlement.

In the first phase, reached in October 2009, Baptist agreed to raise its plan discount and lower the co-payment for inpatient and outpatient services for 2009 and 2010. The percentage participants pay in total premiums cannot be increased through 2014.

Kenneth Johnson, an attorney for the plaintiffs, said the value of the phase I settlement is about $600,000 a year through 2014.

When Beaty asked why MedCost continues to provide services to Baptist employees, Johnson said it is currently offering a better discount than either United Healthcare or Blue Cross Blue Shield of N.C.

Johnson said Norman Goldberg, who had been appointed as an independent fiduciary over the case, had determined MedCost could have provided the same level of discount for the years in dispute in the lawsuit.

"It was one of the reasons why Baptist was found in imprudence," Johnson said.