An insurance policyholder and a chiropractor from Illinois have filed a lawsuit against a unit of Automatic Data Processing (ADP) Inc., claiming the company helped keep claim costs low for its property & casualty insurance company clients by manipulating data used to calculate medical claim payouts.

The suit, filed May 16 in U.S. District Court in southern Maryland, is seeking class action status, according to Robert Holstein of Holstein & Stackler of Chicago. Holstein is representing Carmel Loizon and Dr. Kristen Knudsen, both of Northfield, Ill. Officials from ADP could not be reached for comment.

ADP Integrated Medical Solutions (ADPIMS) of Bethesda, Md., an affiliate of ADP, based in Roseland, N.J., sells a database to insurers that lists charges for medical services and procedures to approximately 23 property and casualty insurers, according to Holstein. The information in the database is gathered from health care providers across the United States, as well as Medicare charges for the Health Care Finance Administration (HCFA).

The suit alleges that ADPIMS reduces the average doctor-charge amounts shown in its database by excluding the highest charges. Usually, anywhere from 15 to 40 percent of the highest charges submitted to ADPIMS from the HCFA are excluded by ADPIMS, according to the suit.

ADPIMS also provides insurers with a form that is sent to policyholders and health care providers explaining why their policies may not have covered the entire claim. Among the explanations usually given are that the medical treatment exceeds the "reasonable" amount that the treatment normally costs in the region, or that the treatment was unnecessary.

Medical treatment "didn't meet criteria"

Loizon, one of the plaintiffs in the suit, received a letter in May 1994 from Allstate Insurance Co. — one of the companies that uses ADPIMS — telling her that she would not be fully reimbursed for medical treatment she received following a Jan. 4, 1993, auto accident. Allstate told her that it reviews all medical bills to ensure that reasonable expenses for necessary medical treatments are covered, and its review "indicates that not all of the treatment or charges meet these criteria."

Similarly, several exhibits in the suit shows that Knudsen, a chiropractor, was not fully paid by Allstate for a number of treatments her patients received because in most cases, the charges allegedly "exceeded the reasonable amount for this procedure in the region where the service was provided." For example, there were some cases where she was paid only $710 for providing $1,007 worth of treatments, and $105 for providing $165 worth of treatments.

Sharon Cooper, a spokesperson for Allstate, acknowledges that Allstate has a contract with ADPIMS, but says that Allstate's goal is to "handle every claim with absolute fairness and objectivity." She says that Allstate considers a variety of facts when evaluating each claim.

Although no insurers are named in the suit, the plaintiffs allege that each agreement ADPIMS had with insurers consisted of a scheme to "fix or restrain" the amounts each insurer would pay their customers for reimbursement for medical service, or health care providers who submitted bills. The suit says the annual fee charged to each insurer for the ADPIMS database is more than $100 million.

Holstein says that class members eligible for the suit include any policyholder or health care provider who has not been fully reimbursed for their treatments by an insurer who uses ADPIMS, and that the reason they weren't fully reimbursed was because the treatment's cost exceeded reasonable charges or was unnecessary.

Holstein acknowledges that it is difficult to determine if your insurer uses ADPIMS, but says that if the suit is certified as a class action, eligible policyholders will be contacted by either the company or his law firm.