WellPoint Settles Claims in Class-Action Lawsuit Filed by Physicians Against Large Health Insurers
Indianapolis-based health insurer WellPoint has become the sixth company to settle claims brought by more than 700,000 physicians against major U.S. health insurers, filing an agreement valued at about $198 million, the Miami Herald reports (Dorschner, Miami Herald, 7/12). In the class-action lawsuit, the physicians allege that many of the nation's largest insurance companies delayed or denied reimbursements for health services and illegally rejected claims for necessary medical treatments as part of a racketeering conspiracy (California Healthline, 5/4).
The lawsuit began as a series of lawsuits filed in 1999 and 2000 by the California Medical Association and other physician groups (Girion, Los Angeles Times, 7/12).
Under the agreement, which still must be approved by U.S. District Judge Frederico Moreno in Miami, WellPoint would pay up to $135 million in damages to doctors who claimed that their medical services were "downcoded" by insurance companies so that reimbursements would be smaller. WellPoint also would contribute $5 million to a not-for-profit health care foundation (Singer, South Florida Sun-Sentinel, 7/12). In addition, the company would reimburse legal fees for the physicians up to $58 million (Colliver, San Francisco Chronicle, 7/12).
The agreement would settle suits against WellPoint and Anthem, which merged last year (Furhmans, Wall Street Journal, 7/12). The company has about seven million members in California, largely under Blue Cross of California (Los Angeles Times, 7/12).
Under the agreement, WellPoint also would invest $250 million in information technology and other procedural changes to its payment system. Wellpoint has been working to improve communication with physicians, including placing payment information on its Web site, according to company spokesperson Jim Kappel (Freudenheim, New York Times, 7/12).
According to the agreement, the company would not be permitted to use computer programs that "systematically downgrade treatments doctors perform or to routinely deny payments for multiple procedures performed on the same day," the Los Angeles Times reports. The agreement also would require WellPoint to update its claims-processing software each year to recognize new and reclassified treatment codes (Los Angeles Times, 7/12).
Lead plaintiffs' lawyer Archie Lamb said physicians would gain about $300 million over several years as a result of WellPoint's systemic changes (Colliver, San Francisco Chronicle, 7/12).
Under the agreement, physicians also would have "more power" to determine the medical necessity of treatments and procedures, the Contra Costa Times reports. Doctors would not be required to use less-expensive alternatives to procedures unless the procedures are equivalent to the desired treatment. If WellPoint disagrees, the physician would be able to appeal to a neutral third party (Silber, Contra Costa Times, 7/12).
WellPoint also agreed to establish a physician-advisory committee to improve communication with doctors and an independent review board to review physician billing disputes (Wall Street Journal, 7/12). Further, the agreement calls for WellPoint to provide coverage for all FDA- and physician-board approved vaccines.
WellPoint did not acknowledge any wrongdoing in the settlement (Los Angeles Times, 7/12). A preliminary hearing on the settlement is scheduled for Tuesday (New York Times, 7/12).
Industry analysts said WellPoint likely would increase premiums to cover some of the costs -- which would include lawyer fees, payments to doctors and implementation of new billing systems and could total more than $450 million over several years.
Kappel said the company might be able to contain premium increases through increased efficiency and modernizing (Connolly, Washington Post, 7/12).
Wellpoint is the fifth "major insurer" to settle with the physicians, the Wall Street Journal reports. Aetna settled in May 2003, followed later that year by Cigna. Health Net and Prudential Insurance, which has sold its health insurance business to Aetna, reached settlements last month (Wall Street Journal, 7/12). Including the WellPoint settlement, the insurers' settlements total $590 million in cash, according to Lamb. Lamb said the $590 million consists of $367 million for physicians, $40 million for a not-for-profit health care foundation and $183 million in attorney fees.
Four remaining defendants -- UnitedHealth Group and Pacificare, which announced a merger last week, and Coventry Health Care and Humana -- are scheduled for trial in January (New York Times, 7/12).
Kent Jarrell, a spokesperson for the remaining insurers in the suit, said, "The defendants are committed to vigorously pursuing the litigation and are now preparing for trial in 2006." Jarrell added, "The defendants are confident of prevailing at trial, based on the evidence."
WellPoint CEO Larry Glasscock in a statement said, "We see this agreement as a very important step in further collaborating with physicians" (Miami Herald, 7/12).
Sam Nussbaum, WellPoint's executive vice president and chief medical officer, said, "This agreement ... will also help to support more efficient and high quality health care that will enable physicians to spend more time with patients and that ultimately benefits everyone, including our members" (AP/Hartford Courant, 7/12).
Lamb said the settlement is similar to those signed with other insurers, including Aetna and Cigna. Lamb said, "We have remedied some of the abuses of managed care, particularly what the companies considered medical necessity, which they looked at based upon cost rather than what the physicians thought was clinically necessary" (South Florida Sun-Sentinel, 7/12).
CMA President Michael Sexton said WellPoint "will no longer be in the exam room with the physician and patient," adding, "The patient will get the appropriate care they need when they need it" (Washington Post, 7/12).
Doug Simpson, an analyst for Merrill Lynch, said the settlement is "a modest positive for the company to put this issue behind it" (New York Times, 7/12).