The U.S. District Court for the Eastern District of California, in an order filed March 31, 2025, issued a mixed ruling on Cigna’s motion to dismiss the PxDx algorithm-focused putative class action (Kisting-Leung, et al. v. Cigna Corporation, et al.), allowing some claims to proceed while dismissing others based on findings concerning standing, timeliness, and pleading sufficiency.

Claims

The claims, asserted by beneficiaries of health insurance plans administered by Cigna, include the following:

• The defendants’ actions constitute an unlawful denial of health insurance benefits under ERISA, as provided in 29 U.S.C. § 1132(a)(1)(B).
• The use of the PxDx algorithm contradicts plan terms that promise medical necessity review by a medical director, which constitutes a breach of fiduciary duty in violation of 29 U.S.C. § 1132(a)(3).
• Some of the plaintiffs’ benefit claims were wrongfully denied as not medically necessary
• The plaintiffs seek an order enjoining the defendants from denying benefits owed to insureds through PxDx review and restitution of the money wrongfully acquired by the defendants.

Court Finds Lack of PxDx Link Defeats Standing for Certain Claims by Three Plaintiffs

A key aspect of the Court’s March 31, 2025, decision involved plaintiff standing, particularly for claims linked to Cigna’s alleged use of its PxDx algorithm. The defendants had mounted a “factual attack” on the standing of three specific plaintiffs—Kisting-Leung, Thornhill, and Bredlow—arguing their claims were not, in fact, denied through PxDx review. To support this, Cigna had submitted an affidavit from a medical officer, Dr. Julie B. Kessel.

Dr. Kessel had stated that Cigna’s procedure, “if a claim was denied based on PxDx review, [was that] both the patient and healthcare provider will receive a separate letter detailing the services billed, the diagnosis codes billed, and the applicable Cigna clinical coverage policy used in adjudicating the PxDx denial.” She testified that for the three plaintiffs in question, “there were no such PxDx denial letters associated with their claims.”

The three plaintiffs who had made the assertion did not provide any countervailing evidence, although according to the court, they argued that “defendants’ evidence is speculative.” As a result, the court found that they were “not subjected to PxDx review,” and the claims that hinged on denial due to PxDx, specifically, were dismissed, although it must be noted that the Court found that claims that depend on wrongful denial of plan benefits that don’t require the use of PxDx to issue the denials were allowed to continue. Additionally, the Court granted leave to amend.

Court Scrutinizes Pleading of Specific Plan Provisions in ERISA Benefit Claims

In its March 31, 2025, order, the Court also addressed whether the plaintiffs had successfully stated a claim for wrongful denial of benefits under ERISA, 29 U.S.C. §1132(a)(1)(B). The Court began by underscoring a fundamental pleading requirement: “‘To state a claim under [§ 1132(a)(1)(B)], a plaintiff must allege facts that establish the existence of an ERISA plan as well as the provisions of the plan that entitle it to benefits’.” Reinforcing this, the Order noted that such a claim “‘ stands or falls by “the terms of the plan.”‘”

Applying this standard, the Court found the plaintiffs’ allegations deficient. Regarding Plaintiff Kisting-Leung, the Court determined that her reliance on Cigna’s “Medical Coverage Policy” to demonstrate entitlement to benefits was insufficient. The Order clarified that Cigna’s “Medical Coverage Policy” is “not the plan itself and does not necessarily mirror plan terms,” but is rather “a set of guidelines Cigna uses to adjudicate claims for benefits.” Thus, referencing this policy did not satisfy the requirement to identify actual provisions of her ERISA plan that entitled her to benefits.

For the remaining plaintiffs, the Court found a similar failure. It observed that while they generally contested the reasons for their claim denials, “they do not actually allege that the specific services … at issue were covered under the terms of the relevant plans or describe the plan terms that would support such coverage.” The Court concluded that “all plaintiffs have failed to sufficiently allege facts stating a claim under § 1132(a)(1)(B),” and consequently, this cause of action was dismissed with leave to amend.

Court Finds Breach of Fiduciary Duty Allegations Sufficient to Proceed

The Court also evaluated the plaintiffs’ claim that Cigna breached its fiduciary duties under ERISA (29 U.S.C. § 1132(a)(3)) primarily by using the PxDx algorithm for medical necessity determinations, allegedly contrary to plan terms. The Order addressed whether a breach was adequately pleaded and whether the plaintiffs sought appropriate relief.

Regarding the core allegation of a breach, the Court analyzed plaintiffs’ assertion that Cigna’s policies promised medical necessity decisions “by a Medical Director,” while the PxDx algorithm was allegedly making these determinations. The Court considered Cigna’s argument that doctors were still involved in using the algorithm. However, even applying a deferential standard of review to Cigna’s interpretation of its plan, the Court found that interpreting plan language requiring a “medical director” to make a decision as allowing an algorithm to do so (even if a director “pushes the button”) could conflict with the plain language of the plan. Consequently, the Court concluded: “Because plaintiffs have adequately alleged that defendants violated the plan terms when they entrusted the medical necessity determinations to the PxDx algorithm, they have adequately plead a breach of fiduciary duty.”

The Court then examined whether the plaintiffs were seeking “appropriate equitable relief” for this alleged breach, a requirement for § 1132(a)(3) claims. Plaintiffs sought, among other things, “declaratory and public injunctive relief enjoining Cigna from continuing its improper and unlawful claim handling practices.” In response, the Court stated: “At the very least, the injunctive relief plaintiffs seek is available under § 1132(a)(3).” This part of the claim, therefore, survived for the plaintiffs who had standing and for whom the claim was timely.

Court Allows Unfair Competition Law Claim to Proceed for Some Plaintiffs

The Court also addressed the plaintiffs’ claims under California’s Unfair Competition Law (UCL). A key component of this analysis focused on whether Cigna’s use of the PxDx algorithm violated the “unlawful” prong of the UCL by contravening specific California statutory requirements.

Plaintiffs alleged that Cigna’s practices violated California Health & Safety Code § 1367.01(e), which mandates: “No individual, other than a licensed physician or a licensed healthcare professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity.”

Cigna argued that its PxDx process, which it stated allows its medical directors to review and deny claims, did not violate this provision. However, the Court “was not persuaded by this argument,” referencing its earlier reasoning that if the PxDx algorithm itself, rather than a qualified professional, is making the denial determination (with doctors allegedly spending minimal time per claim), this could constitute a violation. The Court thus found that plaintiffs had adequately pleaded a violation of this California statute, and consequently, a violation of the UCL’s unlawful prong. Furthermore, this UCL claim (when based on § 1367.01(e)) survived Cigna’s argument that it should be preempted by ERISA. The Court determined that this specific California statute falls within ERISA’s “savings clause” as a law regulating insurance. As a result, the Court denied Cigna’s motion to dismiss the UCL claim for the applicable plaintiffs

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Tags: healthcare ai, healthcare ai litigation, Medicare Advantage