Overruling Objections, U.S. Judge Clears WellPoint's $198 Million Settlement With Doctors - 01/24/06
Article From AMBest Online

A federal judge in Florida has granted final approval to WellPoint Inc.'s $198 million settlement with U.S. physicians, resolving two class-action lawsuits that alleged the managed care giant conspired to delay and deny reimbursements for health-care services.

U.S. District Judge Federico A. Moreno of the Southern District of Florida in Miami wrote in an approval order that the settlement agreement is "fair, reasonable, adequate and in the best interests of the class." He overruled and denied all objections to the settlement.

Dr. Susan R. Hansen, a representative plaintiff and a class member from California, objected to the settlement, court documents show. Under the settlement, announced last July, WellPoint, formed by the November 2004 merger of Anthem Inc. and WellPoint Health Networks Inc., agreed to pay $135 million to the physicians and to contribute $5 million to a not-for profit foundation whose mission is to promote high-quality health care and enhance the delivery of care to the disadvantaged and underserved. WellPoint also agreed to pay $58 million in attorneys' fees (BestWire, July 11, 2005).

Indianapolis-based WellPoint, the largest U.S. health insurer based on membership, said the settlement would resolve two national class-action suits against "both pre-merger companies" - Anthem and WellPoint Health Networks.

The first suit involved a nationwide class of physicians, numbering about 700,000, against the major, for-profit managed care companies. That suit, certified as a class action in September 2002, alleged the companies conspired to use computer software to delay and deny reimbursements and reject claims for medically necessary services in violation of the federal civil Racketeer Influenced and Corrupt Organizations Act.

The second suit, with similar allegations, was filed against the national Blue Cross Blue Shield Association and Blue Cross and Blue Shield companies.

Eighteen state medical societies and associations, including California's, have endorsed the agreement.

However, in her objection filed with the court, Hansen wrote that some California Medical Association "component" medical associations are related to "Foundations for Medical Care," an organization she alleged operates "rental networks."

"These rental networks make money by renting out their contracted physicians to the network's clients (payors/insurers) including defendants such as Anthem Life and Blue Cross of California," Hansen wrote. "Clients can purchase 'access' to physicians' discounted reimbursement rates from rental networks. The bigger the physician discount offered by a rental network, the bigger the economic incentive a client/insurer has to pay the rental network a lucrative 'access' fee."

Hansen, who told the court that class counsel wouldn't represent her in her objections, wrote that "rental networks that are paid by defendants to deny or diminish physician reimbursement or to perform aspects of claims processing, such as medical necessity reviews are agents of the defendants."

She wrote that "leaders of the Foundations or their related organizations (such as CMA through its relationship to its component county medical associations) should not sit on the plaintiffs' side of the negotiating table in this lawsuit."

Archie Lamb, co-lead counsel for the physicians, declined to comment on Hansen's objection.

In an e-mail to BestWire, Lamb wrote that the order "confirms an agreement that requires WellPoint to implement important changes to its business practices that will result in significant savings to physicians in overhead costs and time spent contesting claims" and that the agreement "advances the very basic principle of the supremacy of the physicians' input in the health care process."

WellPoint, Lamb wrote, "recognized that a costly trial on any of the disputed issues with physicians would not be in the interest of the company."

The for-profit companies that haven't struck accords with the physicians - with an April trial date set for the case - are UnitedHealth Group Inc.

(NYSE:UNH), PacifiCare Health Systems Inc. and Coventry Health Care Inc.

(NYSE:CVH). Last month, Minneapolis-based UnitedHealth said it received all necessary approvals for its $9.2 billion acquisition of Cypress, Calif.-based PacifiCare (BestWire, Dec. 21, 2005).

Kent Jarrell, a spokesman for the remaining defendants, wrote in an e-mail that "We are preparing for trial and the claims by the plaintiffs are completely without merit." Last year, Jarrell called conspiracy an "absurd allegation," saying the companies "are all fierce competitors in a competitive marketplace." (BestWire, July 25, 2005)

Also reaching multimillion-dollar settlements with the physicians were Aetna Inc. (NYSE:AET); Cigna HealthCare, a unit of Cigna Corp. (NYSE:CI); Health Net Inc. (NYSE:HNT); Prudential HealthCare, the former unit of Prudential Insurance Company of America; and most recently, Humana Inc. (NYSE:HUM) in October (BestWire, Oct. 18, 2005).

Most of WellPoint's operating subsidiaries have Best's Financial Strength Ratings of A (Excellent) or A- (Excellent).

WellPoint's stock was trading at $78.93 a share on the afternoon of Jan. 6, down 0.08% from the previous close.