Lori Swanson (D)

MINNEAPOLIS, Minn. (Legal Newsline)- Allina Health System has settled a lawsuit that it was charging patients with medical bills more than double the rate of interest allowed by Minnesota law.

State Attorney General Lori Swanson, in her lawsuit filed earlier this year, alleged that Allina was violating state usury laws by charging interest rates of up to 18 percent to patients with bills to the company, while state law has a cap of 8 percent interest on such debts.

The lawsuit, filed in Hennepin County District Court, named as defendants Minneapolis-based Allina and Accounts Receivable LLC, the company's debt collection agency.

Allina presented patients with medical debts three payment options, which included spreading payments over time through its MedCredit subsidiary. MedCredit charged interest of 18 percent on debts up to $4,999 and 12 percent on debts from $5,000 up to $9,999, the lawsuit said.

Swanson said Tuesday that Allina has agreed to reimburse patients who were charged more than 8 percent interest on their MedCredit account between January 22, 2007 and January 31.

On February 1, interest on all current and future MedCredit accounts was capped at 8 percent. Refunds under the agreement are expected to exceed $1 million.

"I realize that hospitals are facing their own financial pressures as a result of the bad economy and lack of adequate insurance coverage for patients," said Swanson, a Democrat.

Patients eligible for a refund who currently have a balance on their MedCredit account, will have their refund will be applied to their existing balance. If the refund is greater than their existing balance, the difference will be held in the account and applied to future charges at Allina, the attorney general's office said.

Allina CEO Ken Paulus said in a statement that resolving the lawsuit was in the best interest of patients.

"In this tough economy, when more and more people are without insurance and those who are insured have to pay an increasing share their health care costs from their own pockets, Allina and the attorney general share the goal of ensuring that all patients are treated with fairness and respect when it comes to paying their health care bills," he said.

From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.

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