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Settlement reached in $2M ERISA suit against Kickapoo Tribe

By David Yates | Nov 21, 2016

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HOUSTON — A settlement has been reached in a suit brought by a Texas hospital, which accused the Kickapoo Traditional Tribe of Texas of fraud and violating a federal labor law when its health plan and plan administrators refused to pay more than $2 million in medical benefits for services provided to an employee covered in the health plan.

Victory Parent Company, which owned Victory Medical Center Landmark in San Antonio, brought a lawsuit July 8 in U.S. District Court for the Southern District of Texas against the tribe, as well as its self-insured group health plan and two plan administrators: Lucio Garcia-Zuazua and Roberto L. Rodriguez, who is general counsel for the tribe.

Victory Parent Company filed for bankruptcy in June 2015.

Court records show a conditional order of dismissal was entered in the case on Nov. 18, stating the court has been advised that a settlement has been reached between plaintiff and defendant.

“The Court dismisses this case without prejudice to reinstatement of plaintiff's claims if any party represents to the Court within 30 days from the date of this order that the settlement could not be completely documented,” the order states.

The plaintiffs claimed plan administrators conspired to defraud Victory Parent without regard for their fiduciary responsibilities mandated by the Employee Retirement Income Security Act of 1974, which sets minimum standards for most health plans in private industry.

Under ERISA, health plans must disclose plan information to participants. It also outlines the fiduciary responsibility of plan administrators, which refers to the rule that administrators act in the interest of participants and beneficiaries for the purpose of providing benefits and paying expenses.

The complaint outlined a series of events starting with a patient who sought services in 2013.

In August and September of that year, a patient referred to in court documents as Patient RS underwent lumbar anterior and posterior procedures that required two weeks of inpatient care. Victory Parent claims that it verified the patient’s insurance, including any exclusions to benefits under the plan and pre-certification of the medical necessity of the treatment before conducting the procedures.

It submitted a claim for more than $2.1 million, but the plan rejected the entire claim, saying the treatment wasn’t medically necessary. Victory Parent appealed the decision and, after two years, was told the claim was denied because of exclusions in the plan. To the plaintiffs, both reasons were highly suspect because of the steps taken ahead of providing any medical treatment.

According to the complaint, treatment was determined to be medically necessary and no exclusions were found.

Victory Parent requested copies of the plan to verify the exclusions five times, and claims the defendants refused to produce the documents. Plaintiffs allege that the exclusions weren’t in place at the time of the procedure and the defendants created exclusions later to justify denying the benefits.

Following news of the suit, Kickapoo issued a statement saying it would defend itself against the lawsuit and that the tribe always lives up to its obligations.

Case No. 4:16-cv-02029

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U.S. District Court for the Southern District of Texas Houston Division