Health plan giant WellPoint announced it will pay $198 million to settle allegations brought in a class-action lawsuit by 18 state medical associations on behalf of 700,000 physicians. The associations claimed the merged company underpaid for physician services and let hospitals bill WellPoint members for services the company should have paid. Under the settlement agreement, WellPoint will pay $135 million to physicians; contribute $5 million to set up a foundation to promote quality healthcare and improve healthcare delivery to the uninsured; and pay up to $58 million in legal fees.

Indianapolis-based WellPoint, which serves 28.5 million members and operates Blue Cross and Blue Shield HMOs and other health plans in 13 states, merged with Anthem last year. The settlement resolves claims against both pre-merger companies. The suit was filed in U.S. District Court in Miami and the allegations are similar to those already settled with health plans from Aetna, Cigna, Prudential and Health Net.

WellPoint will take a $103 million charge in the second quarter of 2005 to pay for the settlement.

"We see this agreement as a very important step in further collaborating with physicians," WellPoint Chief Executive Officer Larry Glasscock said in a statement. "We look forward to forging a closer partnership with the physician community in order to truly transform healthcare for the better."

"WellPoint obviously recognized that a costly trial of any of the disputed issues with physicians would not be in the interest of the company," said Archie Lamb, one of the lawyers representing the associations. "This agreement advances a very basic principle: that the physicians' input is a critical part of the healthcare system."