WellPoint
Inc. became the latest, and largest, health insurer to settle a longstanding
class-action suit with more than 700,000 U.S. physicians who claimed
managed-care companies unfairly cut reimbursements to them.
WellPoint
Inc. became the latest, and largest, health insurer to settle a longstanding
class-action suit with more than 700,000 U.S. physicians who claimed
managed-care companies unfairly cut reimbursements to them.
WellPoint, of Indianapolis, and plaintiffs attorneys valued the settlement at
roughly $198 million. The agreement is still subject to the approval of Judge
Federico Moreno of federal district court in Miami, where it was presented
yesterday.
At the heart of the legal battle are health insurers' claims-reimbursement
systems that often automatically reduced doctors' bills to what the companies
thought they should pay rather than what the doctor charged. The physicians
contend these processes systematically cheated them out of full payment.
WellPoint said it viewed the settlement as a means to end the litigation, not an
acknowledgment of any unfair payment practices. But WellPoint's relationships
with doctors and medical associations could improve after nearly six years of
costly litigation.
"We see this agreement as a very important step in further collaborating with
physicians," said Larry Glasscock, WellPoint's president and chief executive.
The company added that it is in the process of investing as much as $250 million
in improvements or changes to some of its bill-payment and operational processes
involving physicians.
WellPoint, the country's largest health insurer with 28.5 million health-plan
members, is the fifth major insurer to settle with the physicians. Aetna Inc.
was the first company to settle, in May 2003, followed by Cigna Corp. later that
year. Last month, Health Net Inc. and Prudential Insurance Co. of America, which
has since sold its health-insurance business to Aetna, also reached settlements.
That leaves UnitedHealth Group Inc., PacifiCare Health Systems Inc., Humana Inc.
and Coventry Health Care Inc. headed for trial in early 2006 unless they reach
settlements. Yesterday, they showed no sign of that possibility.
"The defendants are continuing to vigorously pursue the case and are preparing
for the trial in early 2006," said Kent Jarrell, a spokesman for the remaining
companies in the litigation. "Based on the evidence, the remaining defendants
are confident of prevailing at trial." In January, the remaining companies lost
a U.S. Supreme Court appeal to stop the litigation from going forward as a
class-action suit.
WellPoint's agreement with the doctors is similar to the others. The company
will contribute $135 million to a fund to which doctors can submit previously
disputed claims, and another $5 million to a foundation set up under the
previous settlements to promote better health care and access for the
disadvantaged. In addition, WellPoint will pay as much as $58 million in legal
fees, the full amount to be determined by Judge Moreno.
The settlement covers suits against the former WellPoint Health Networks and
Anthem Inc., which merged to become WellPoint last year. The company, which
operates mostly plans with the Blue Cross or Blue Shield brands, said it expects
to report a pretax charge of $103 million, or 10 cents a share after tax, for
the second quarter.
On its face, the settlement doesn't do much for doctors financially. But
attorneys for the doctors say that the changes will amount to a few hundred
million dollars in savings for physicians over several years. That includes
savings resulting from new systems that speed up payments to doctors and
eliminate some of the cuts to reimbursements that might have been previously
made.
In addition, WellPoint has agreed to set up: a physician-advisory committee
aimed at improving communications with doctors; an independent review board to
hear physicians' billing disputes with the health insurer; and standardized
definitions of what makes certain procedures or services medically necessary.
"That's the real objective of this," said Archie Lamb, co-lead counsel for the
doctors.
The dozens of cases, now consolidated before Judge Moreno, began in 1999 as many
of the country's most powerful plaintiff's attorneys turned their attention from
the cigarette industry to health insurers. Since then, many insurers have
retreated from some of the more contentious reimbursement practices, partly in
response to increased state regulations and pressure from doctors and patients.
Aetna and Cigna, the companies that settled first, are still in the midst of
implementing changes, so it's difficult to gauge all the benefits of the earlier
settlements, doctors say. "But we see a new attitude," said Jack Lewin, a family
physician and chief executive of the California Medical Association.