Milliman’s proposed $15.5 million settlement puts life insurance underwriting data in focus

Milliman Inc. has agreed to a proposed $15.5 million settlement resolving class-action allegations that its IntelliScript service supplied inaccurate medical and prescription information to life insurers.

The company said it agreed to settle to avoid the cost, distraction and uncertainty of prolonged litigation. Milliman maintains that its processes and procedures are sound.

"We are confident in our process and procedures, and the settlement allows us to put these matters behind us while continuing to focus on serving clients," said Jeremy Engdahl-Johnson, senior director of global communications. He emphasized that the settlements are not admissions of wrongdoing or liability.

Six plaintiffs filed an unopposed motion for preliminary approval Oct. 26 in the U.S. District Court for the Western District of Washington. The proposed settlement has not received court approval.

The lawsuit, Healy et al. v. Milliman Inc., accuses the company of violating the Fair Credit Reporting Act by providing inaccurate consumer reports, failing to properly investigate disputes and not fully disclosing information in consumers' files.

Medical data in life insurance underwriting

The case traces back to James Healy's application for life insurance with Americo Financial Life and Annuity Insurance Co. in April 2020.

Americo requested a report of Healy's medical and prescription history from Milliman's IntelliScript service. Prepared April 21, the report included 13 medications Healy said he had never taken and 176 medical entries for care he said he had never received, his original complaint states.

It also attributed conditions including diabetes, liver disease, chest pain, osteoarthritis and sleep apnea to Healy. In a later review of the case, the 9th Circuit Court of Appeals described the records as belonging to another person and noted that the conditions carried the report's highest-risk indicator.

Americo denied Healy's application on April 29, 2020, because of the erroneous risk flags, the appeals court found.

IntelliScript compiles medical and prescription information from sources such as pharmacies, pharmacy benefit managers and health insurers.

The Consumer Financial Protection Bureau identifies it as a medical consumer reporting company that collects prescription drug purchase histories to help assess life insurance applicants' mortality risk and provide underwriting scores.

Disputes over record matching

At the center of Healy's claims is how Milliman matched medical records to individual consumers.

The 9th Circuit's January opinion described a process known as fuzzy matching. Rather than relying exclusively on an exact Social Security number match, the process can identify records through similarities in names and other identifying information.

Social Security numbers were used to match about 87% of the information Milliman associated with applicants, the court's opinion said. Other identifying details were used for the remaining records.

Healy also disputed how Milliman handled challenges to the report. After receiving it, he contacted the company to contest the information. Milliman asked him to obtain records from pharmacies to support his dispute, the complaint recounts.

Healy argued that request was impractical because he had never received care from most of the pharmacies listed. He further alleged that Milliman failed to conduct a reasonable reinvestigation or correct the disputed information.

The complaint raises a separate issue involving disclosures, alleging that Milliman did not give consumers complete information about the sources of data included in their reports.

Appeals court revived part of the case

The case reached the 9th Circuit after a federal district court granted Milliman partial summary judgment on claims involving inaccurate reports and class-wide standing.

In its Jan. 9 opinion, the appeals court said members of a certified class seeking monetary damages must provide evidence of standing at the summary judgment stage. However, the district court had applied the wrong standard by requiring direct evidence of injury.

Circumstantial evidence could also be used, the panel ruled. It reversed the partial summary judgment and sent the issue back to the district court for reconsideration.

The decision did not establish that Milliman violated the Fair Credit Reporting Act or that every report at issue contained inaccurate information. Those allegations remained unresolved.

Proposed settlement terms

The proposed settlement covers an estimated 780,965 consumers across three groups, according to Top Class Actions' report on the agreement.

One group involves consumers whose reports contained certain medical or prescription records associated with mismatched Social Security numbers.

Others involve consumers who disputed information but allegedly did not receive a proper or timely reinvestigation, as well as those who received incomplete disclosures about information in their files.

The estimated class size should not be interpreted as the number of people who received inaccurate medical records or were denied life insurance. The proposed classes also include disputes over reinvestigation procedures and file disclosures.

Under the reported terms, approximately $9 million would be available for valid claims. Payments would be calculated through a points system based on the type of claim.

Class counsel estimates individual payments could range from $30 to $1,000, depending on the number of claims filed.

Milliman would also be required to maintain enhanced practices for at least five years under the proposed agreement. Reported changes include automated checks for mismatched records, improved tracking of consumer disputes and expanded disclosures about reports compiled for consumers.

The settlement remains subject to court approval. Claim-filing instructions and payment dates have not been announced.

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Noah Lopez is editorial assistant for InsuranceNewsNet. Contact him at noah.lopez@innfeedback.com.