Insurer loses appeal of arbitration

Michelle Swafford

Tuesday, Nov. 23, 2004 | 10:38 a.m.

Health Plan of Nevada, a subsidiary of Sierra Health Services Inc., has been ordered by the Nevada Supreme Court to pay an arbitration award in excess of $5 million.

The Las Vegas-based health maintenance organization was in an agreement from August 1995 to May 1997 to offer Rainbow Medical LLC, a pharmaceutical company that is no longer in business, as an option to fill prescriptions, Rainbow Medical attorney Phil Aurbach said.

The Nevada Supreme Court case said Health Plan of Nevada alleged that Rainbow was not providing quality services to patients. Rainbow Medical alleged that Health Plan of Nevada changed its coverage area and expanded the required services without increasing the flat rate that Rainbow was receiving for services.

The parties went to binding arbitration in 2001 and an arbitrator with the American Arbitration Association said Health Plan of Nevada had breached its duty and awarded more than $5 million to Rainbow Medical, according to court documents.

Health Plan of Nevada appealed the arbitrator's decision before a district court judge. The judge upheld the arbitrator's decision and Health Plan of Nevada appealed to the Nevada Supreme Court.

The state's high court agreed with the previous two decisions, upholding Rainbow Medical's award of more than $5 million.

Aurbach said his client was forced out of business when Health Plan of Nevada did not pay because it was Rainbow's only client. Rainbow sold its assets to Resource Healthcare LLC in 1997, he said.

He estimates Health Plan of Nevada will pay about $6.2 million once interest is figured into the arbitrator's award.

Officials with Health Plan of Nevada declined to comment on the case or the award.