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Law360 (January 3, 2019, 6:56 PM EST) — A Pennsylvania court refused Thursday to throw out a whistleblower suit accusing state insurance regulators of retaliating against a former actuary who reported potential collusion between Aetna Inc. and agency officials on improper rate increases for policyholders.

A three-judge Commonwealth Court panel said that unsettled factual questions over the Pennsylvania Insurance Department’s treatment of James Sabater after he reported the rate irregularities meant that the agency was not entitled to summary judgment.

“This case does not present a situation where there are no outstanding issues of material fact and the court can simply apply the law,” the court said in an opinion penned by Judge Christine Fizzano Cannon. “Instead, despite respondents’ insistence to the contrary, necessary findings of fact remain to be made … including conduct and motivation surrounding petitioner’s treatment after reporting Aetna’s alleged irregularities.”

Sabater filed suit in December 2014 alleging that he was forced into retirement after a nine-year career with the department for reporting irregularities he first discovered in 2009 that Aetna had been allowed to implement rate increases without proper regulatory approval. In particular, according to court filings, the former actuary said that a department reviewer’s comments criticizing an Aetna filing had been deleted by one of the agency’s executive deputy commissioners. Sabater also said he faced criticism from supervisors after raising concerns in 2012 that Aetna had implemented new rates without securing proper department approval.

The department, however, fired back with arguments that it had taken Sabater’s reports seriously. It pointed to an investigation it said it conducted that revealed Aetna had internally implemented unapproved rate increases, but had never actually charged them to any consumers and, as such, was not required to pay any penalties or restitution. No department employees were found at fault as a result of the inquiry, according to Sabater’s attorney. The department also argued that Sabater could not show he had been subject to any retaliation given that, in the time between when he made the reports and his retirement, he had actually received a promotion.

In addition, the department argued that Sabater’s decision to voluntarily end his employment barred claims that he had been retaliated against. Even if he hadn’t left of his own volition, the department argued, Sabater would have been dismissed for violating departmental policies regarding acceptable use of agency computer equipment by sending demeaning and disparaging emails about fellow employees and agency executives.

But despite the department’s arguments, the court credited allegations that Sabater’s purported violations of IT policies were a pretext to force him to give up his position, and said there were unanswered questions about the conduct of his supervisors in the aftermath of the reports he made about Aetna’s rate increases.

“The reaction of the agency to his conduct was grossly disproportionate with how they’d handled similar situations in the past where someone might’ve gotten a verbal warning for bad taste email communications,” said Arthur Goldman, who is representing Sabater in the case. He said he was heartened by the Commonwealth Court’s decision, and expected a trial to be scheduled in about six months. “We view Mr. Sabater as a hero and an extremely bright, qualified individual who spoke up when he saw something wrong,” Goldman said. A spokesman for the department declined to comment.

Judges Robert Simpson, Patricia A. McCullough and Christine Fizzano Cannon sat on the panel for the Commonwealth Court. Sabater is represented by Arthur Goldman and Ethan Quirin of the Law Office of Arthur Goldman. The department is represented in-house by Brad Harker and Kathryn McDermott Speaks. The case is Sabater v. Pennsylvania Insurance Department et al., case number 637 MD 2014, before the Commonwealth Court of Pennsylvania.

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Arthur D. Goldman

Attorney at law

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