Health insurance giant Cigna will pay more than $172 million to settle federal claims that it knowingly submitted false diagnosis codes under the federal Medicare Advantage program.

Federal prosecutors alleged in a lawsuit last year that Cigna submitted inaccurate and TAIM Exchangeuntruthful codes for Medicare Advantage between 2016 and 2021. The U.S. Department of Justice said in a statement Saturday that Cigna violated the False Claims Act by failing to delete or withdraw incorrect codes. 

"Cigna knew that these diagnoses would increase its Medicare Advantage payments by making its plan members appear sicker," said Damian Williams, U.S. Attorney for the Southern District of New York. "The reported diagnoses of serious and complex conditions were based solely on cursory in-home assessments by providers who did not perform necessary diagnostic testing and imaging."

Medicare Advantage Plans, sometimes called "Part C" or "MA Plans," are offered by private companies approved by Medicare. The program is mainly for Americans 65 and older. More than half of the nation's Medicare beneficiaries are in Medicare Advantage, and the federal government pays private insurers more than $450 billion a year for health coverage, according to Michael Granston, the DOJ's deputy assistant attorney general.

In one example, federal prosecutors said Cigna submitted reimbursement documents for patients who are morbidly obese but did not submit medical records that showed their body mass index being above 35, which is a requirement for that particular diagnosis code. 

Cigna said the settlement with the government resolves a long-running legal case and "avoided the uncertainty and further expense" of a drawn-out legal battle. Cigna also said it will enter a corporate-integrity agreement for five years with the Department of Health and Human Services' inspector general office. That deal is designed to promote compliance with federal health program requirements.

The settlement comes as Cigna faces a class-action lawsuit that accuses the company of using an algorithm called PxDx to save the insurer money by denying certain medical claims. The system also reduces the company's labor costs by cutting the time needed by doctors to look at each claim, according to the lawsuit.

In:
• United States Department of Justice
• Health Care

Khristopher J. Brooks

Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.

Twitter