A group of insurers led by UnitedHealthcare and Kaiser Foundation Health Plan subsidiaries asked a federal judge to slash the $184 million in lawyers fees owed after winning health plans $3.7 billion from two class-actions related to a now-expired Affordable Care Act program.
More than 30 insurers wrote to the U.S. Court of Appeals for the Federal Circuit on January 20, saying that Quinn Emanuel Urquhart & Sullivan’s 10,000 hours on the case did not warrant the $184 million awarded to them, which the 34 health plans described as “the epitome of a windfall.” The law firm’s collection represents 5% of the total settlement awarded to the hundreds of insurers that sued through the class-actions, which is the maximum amount the law firm can receive from the deal.
Quinn Emanuel represented the group of payers that were the first to sue the U.S. government over unpaid risk-corridor funds that had been promised to them during the first three years of the Affordable Care Act exchanges. The government said it would collect payments from profitable health plans and pass them on to insurers with high losses, with the idea that subsidizing insurers would help keep consumer premiums stable.
But the government failed to pay insurers the full amount owed, arguing that by, passing appropriations riders, Congress erased its obligation and made the program essentially budget neutral. The Supreme Court disagreed and, in 2020, ruled the federal government owed insurers more than $12 billion in back payments.
In September, a judge from the U.S. Court of Federal Claims ruled that the $184 million insurers owed Quinn Emanuel represented a reasonable return given the complexity of the case. Judge Katherine Davis wrote that in common fund cases–where plaintiffs sign on with the understanding that they will only pay if their lawyers win a settlement–a percentage of the fund awards are common fee structures for lawyers.
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Insurers are advocating Quinn Emanuel’s fee be calculated by assessing the amount of billable hours lawyers actually worked on the case, a process called a lodestar cross-check. Under this method, Quinn Emanuel would be paid $10 million, Judge Davis wrote in September. They’re asking the appeals court to drop the $184 million award and send the case back to a court that will conduct a lodestar cross-check.
“Class counsel deserves to be paid fairly for its work,” insurers lawyers wrote. “What Class counsel does not deserve, however, is the astronomical award the claims court granted it: a full 5% of the class fund, which totals more than $184 million and works out to an hourly fee of more than $18,000.”
Insurers were given fair warning that Quinn Emanuel could collect up to $184 million when they signed on to participate in the class-actions, said Stephen Swedlow, managing partner of Quinn Emanuel’s Chicago office. He added that 5% is a lower percentage than typically collected in megafund cases that result in settlements of more than $1 billion.
“We took something that was nothing, and turned it into billions of dollars,” Swedlow said. “In our notice, we said we may collect 5%, and then you, as a client, can choose whether you want to participate in the case or not. This is an epitome of full alert that you might pay 5% if we recover hundreds of millions of dollars, which is what happened.”
Quinn Emanuel will submit a brief justifying the reimbursement amount by March 1. Swedlow said he is unsure about when the appeals court will hear the case.
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