PHYSICIANS AND HEALTH NET ANNOUNCE SETTLEMENT OF LANDMARK LITIGATION - 05/17/05

Settlement Focuses on Improving the Quality of the Health Care Delivery System

Anticipated Court Acceptance of the Settlement Agreement Will Conclude Litigation for Health Net

Miami, FL May 3, 2005 – Health Net and representatives of over 700,000 physicians, state and local medical societies announced today the settlement of the national class action lawsuit pending in the federal court for the Southern District of Florida before U.S. District Judge Federico Moreno.  Final judicial approval of the settlement agreement by Judge Moreno will extinguish liability for lawsuits filed against Health Net over the last 10 years or more by physicians and physician groups. 

The settlement document provides improvements to physician-related business practices as well as cash payments to physicians in accordance with specific terms outlined in the agreement.    The agreement will also enhance communication between physicians and Health Net, reduce administrative complexity in the claims payment system and help improve the quality of the health care delivery system. These changes are expected to result in increased predictability and speed of claims payment, creating significant value for physicians by reducing time-consuming and costly administrative burdens and giving physicians and their office staffs more time to focus on their central mission - providing health care to patients.

"This settlement places an ailing health care system on the road to recovery through a set of commitments which are premised upon achieving the highest quality health care,” said Edith Kallas, partner with Milberg Weiss Bershad Hynes & Lerach in New York. 

“I believe that this settlement represents a major step forward in helping physicians go back to doing what they do best – taking care of their patients.
 
It is also a positive step for Health Net in that it can leave behind years of an adversarial relationship with physicians and forge a new era of cooperation with them.
 
Health Net has now joined Aetna and Cigna as managed care organizations that truly value a positive relationship between insurers and physicians, something which can only serve to benefit employers who seek the best care for their employees,” said Tim Norbeck,Executive  Director of the Connecticut State Medical Society.

The economic details of the settlement include a guaranteed cash payment to physicians of at least $60 million.  The dollar value of savings to physicians could equal approximately $300 million over coming years.  The total value to physicians of today’s agreement is in excess of $360 million.   

 “CMA began the battle against California’s largest for-profit health plans-Blue Cross/Wellpoint, Health Net  and PacifiCare-five years ago, when it became obvious that  insurance companies were promising patients one thing to sell a policy and then doing the opposite when it came time to deliver health care,” Dr. Michael Sexton, M.D., CMA president. “This is a victory for physicians and patients. It is a shame that other health plans are still delaying doing what is right for patients.”

 “This settlement provides significant gains for physicians and patients,” said Dr. Jack Lewin, M.D. “We hope it puts leverage on the other health plan defendants to move ahead and resolve this suit without the need for a protracted trial. Most important, settling the suits means we can spend our time and resources working together on quality of care, patient safety, and expanding access together-and that's where we need to be.”

 In addition, the physicians have agreed to a $22.2 million settlement with Prudential Insurance Company of America , which operated Prudential Health Care until it sold the subsidiary to Aetna in 1999.   Because it has been out of the health care business for nearly six years, Prudential does not have the ability to implement any of the policy changes we have obtained from the other settling parties.  Indeed, the policy changes with respect to Prudential Health Care were obtained as part of a 2003 settlement with Aetna.   Under the circumstances we (and Prudential, which has not admitted any wrongdoing) agreed that a costly trial of any of the disputed issues with its former health care subsidiary would not be in the interest of either side.

“These two agreements recognize the over-riding importance of the physicians’ input in all healthcare decisions.  Health Net’s agreement to be bound by these innovative industry guidelines demonstrates that only by a commitment to partnership can the true goal of quality healthcare be achieved,” noted Co-lead Counsel for the physicians, Archie Lamb.

The California Medical Association is the professional organization of 35,000 California physicians, representing all modes of practice and specialties.

For additional details or to schedule an interview, please contact Audrey Mullen at 703-548-1160.