Aetna and Optum Settle Dummy Code Lawsuit for $8.4 Million

Case Overview: Aetna and Optum have agreed to an $8.4 million settlement to resolve claims that they added extra billing codes, or "dummy codes," that disguised administrative costs as medical services, forcing patients to pay more out of pocket.

Consumers Affected: U.S. consumers who were a part of the class action that alleged Aetna and Optum added "dummy codes" to their bills.

Court: U.S. District Court for the Western District of North Carolina

A nearly decade-long case against Aetna and Optum has ended with an $8.4 million settlement. The lawsuit claimed the companies added extra billing codes—known as “dummy codes”—that disguised administrative costs as medical services, forcing patients to pay more out of pocket.

The settlement, approved by the U.S. District Court for the Western District of North Carolina, requires Aetna to contribute $4.6 million and Optum to pay $200,000 into a fund compensating patients and health plans. Aetna will also cover $3.6 million in attorneys’ fees, according to Healthcare Dive.

Retiree Brought the Case After Seeing Bills Rise

Sandra Peters, a North Carolina retiree covered by Aetna insurance, first filed the lawsuit in 2015. Peters noticed her expenses for chiropractic and physical therapy services had climbed unexpectedly. 

Her complaint alleged that Aetna and Optum Health, a division of UnitedHealth’s Optum business, conspired to pass along costs that should never have been billed to patients.

According to court filings, Optum was responsible for managing Aetna’s provider network for certain types of care. The lawsuit argued that Aetna instructed Optum to submit extra service codes to cover administrative expenses. Those codes then appeared on patient bills as if they were tied to medical services, creating the impression that the charges were legitimate.

Internal Emails Allegedly Revealed Companies' Agreement

During discovery, emails between Aetna and Optum executives surfaced showing they had agreed to add the additional codes. Aetna also confirmed to North Carolina regulators that it directed Optum to submit the billing entries so the contractor could be reimbursed for its services.

The plaintiffs argued this scheme violated the Employee Retirement Income Security Act (ERISA), which requires insurers administering employer-sponsored plans to act in the best interests of members. The class, which eventually grew to cover more than 250,000 individuals, alleged that Aetna and Optum breached their fiduciary duties under the law.

Lower Court Initially Sided with Aetna, But Appeals Court Reversed

The case faced a long procedural history. In 2019, the district court sided with Aetna and Optum, finding no ERISA violations. Two years later, the U.S. Court of Appeals for the Fourth Circuit overturned that ruling, holding that the companies could indeed be liable for the increased costs imposed on patients. 

The Supreme Court later declined to review the case, sending it back to the lower court.

After a year of negotiations, the parties reached a settlement in late 2023. Preliminary approval was granted in March 2024, with final approval following this year. The deal closes one of the longest-running insurance lawsuits in recent memory.

Settlement Provides Compensation to Hundreds of Thousands of Members

Under the terms, affected class members will be compensated for the additional expenses caused by the disputed billing practice. Exact payout amounts will depend on the number of valid claims filed.

The lawsuit accused the insurers of using a practice that unfairly inflated patients’ bills across a large network of providers. By disguising administrative costs as medical service codes, the plaintiffs said, the companies shifted millions of dollars onto members and employer health plans.

Aetna Defended Its Contracting Arrangements

Although Aetna agreed to settle, the insurer has consistently denied wrongdoing. The company argued that overall costs for patients were lower than they would have been if Aetna had not contracted with Optum to manage services. Nonetheless, the lengthy appeals process and potential exposure to billions in damages led to a negotiated resolution.

Optum initially hesitated to finalize the agreement but ultimately agreed to contribute toward the settlement fund. Both companies avoided a trial that could have stretched into late 2025.

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