WellPoint settles class-action lawsuit; will holdouts follow?

Four HMOs are left to defend charges of underpayments.

By Mike Norbut — Posted Aug. 1, 2005

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Insurance giant WellPoint Inc. has become the latest managed care company to settle class-action claims filed by more than 700,000 physicians. The company agreed last month to pay $198 million and make business changes in response to claims by doctors that HMOs have failed to reimburse them fairly.

Attorneys and medical societies involved in the class-action cases are hoping the July announcement of the latest agreement will generate momentum that could compel the remaining insurance companies to settle before the Jan. 23, 2006, scheduled trial date. Adding WellPoint, the nation's largest private health insurer with about 28.5 million members, to the list of completed deals is significant because it puts the physicians' case back in the public eye, they said.

"I think this certainly has the possibility to fast-forward all of this," said Tim Norbeck, executive director of the Connecticut State Medical Society, one of 18 medical societies WellPoint lists as endorsing the agreement. "I wouldn't be surprised if we get several others reasonably soon. The more we get, the more pressure there will be on the others to settle."

In addition to establishing a $135 million settlement fund, WellPoint will contribute $5 million to a foundation designed to promote higher quality health care for underserved patients. The company also will pay as much as $58 million in legal fees.

WellPoint also has pledged to make about $250 million in infrastructure changes to ease communication and reimbursement problems physicians have encountered with the company.

"While not perfect, this settlement promises unfettered physician-patient communication when it comes to discussing treatment options with their patients," said Medical Assn. of Georgia President John Antalis, MD. "There is nothing more important than making sure that only patients and their physicians are decision-makers when it comes to evaluating medical care options."

In a statement, WellPoint president and CEO Larry C. Glasscock said the company looks forward to "forging a closer partnership with the physician community in order to truly transform health care for the better."

"We see this agreement as a very important step in further collaborating with physicians," Glasscock said. "By working together, we can find ways to continuously improve the health of our members and find real solutions to the most complex health care issues facing our country today -- affordability of care, access to care and the uninsured."

Four companies left

The WellPoint settlement earned preliminary approval from U.S. District Judge Federico A. Moreno, who set a Dec. 2 hearing date to address final approval. It includes the resolution of two national lawsuits against WellPoint Health Networks Inc. and Anthem Inc., which merged to form the nation's largest health plan last year.

The agreement follows closely on the heels of agreements forged with California-based Health Net and Prudential Insurance Co., which announced their deals about two months ago. Aetna and Cigna both settled physician claims in 2003. The remaining defendants include Coventry, Humana, PacifiCare Health Systems and UnitedHealthcare.

The settlements stem from lawsuits filed by doctors who allege that the HMOs conspired to systematically underpay physicians by downcoding and bundling claims. Doctors allege the health plans with violating federal civil law under the Racketeer Influenced and Corrupt Organizations Act.

AMA Chair Duane M. Cady, MD, said the Association hopes the remaining defendants settle "in order to move toward improved relations with physicians, which have been seriously damaged by years of unfair business practices."

Some doctors have learned that settlements don't automatically mean amicable relations with managed care companies, however. Attorneys already are in monthly mediation sessions with Aetna officials regarding complaints doctors have made about the managed care company bundling or downcoding claims against the terms of the settlement agreement.

The four companies that have not settled don't appear ready to make any concessions to doctors either.

Kent Jarrell, a spokesman for the remaining defendants, said the companies "are committed to defending themselves vigorously in this litigation and are preparing for trial."

Two of those companies, United and PacifiCare, have recently announced plans to merge, a move that adds another layer of uncertainty to settlement talks.

Employer involvement

What could force the other HMOs to reach out to physicians is pressure from employers who contract with the insurers, Norbeck said. While they haven't played a decisive role yet, businesses have shown a keen interest in finding ways to control rising health care costs. A drawn-out, expensive trial wouldn't exactly save the insurers money, and businesses could fear seeing the costs passed on to them.

"As we gather more settlements, I would think employers would say [to health plans], 'A number of HMOs have settled their differences with physicians. Why haven't you?' " Norbeck said.

Like previous settlements, the WellPoint agreement establishes standardized definitions of medical necessity in different cases and an independent review board to hear billing disputes doctors may have with insurers.

"This agreement recognizes a very basic principle: that the physicians' input is paramount and not to be second-guessed by corporate executives," said California Medical Assn. president-elect Anmol Mahal, MD.

As with the other settlements, attorneys and medical society executives cautioned doctors to look beyond the dollar figure. While dividing $135 million among some 700,000 doctors only equals about $193 per physician, the fundamental changes insurers have been forced to make will serve doctors in the long run, they said.

"This was never about the money," Norbeck said. "There was never an opportunity to recoup all the physician losses due to managed care over the last 20 years, because it would break the system. So we did the next best thing: we got prospective relief. We're changing a very egregious system moving forward."

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And then there were 4

Of the 10 original HMO defendants in the physicians' class-action lawsuit, only four have not settled.

Companies that have settled: Aetna, Cigna Healthcare, Health Net, Prudential Insurance Co. of America, WellPoint (includes claims against WellPoint Health Networks and Anthem)

Companies that have not yet settled: Coventry, Humana, PacifiCare Health Systems*, UnitedHealthcare*

*PacifiCare and United have announced plans to merge.

Source: Law Offices of Archie Lamb LLC

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