WellPoint will pay up

WellPoint Inc., the nation's largest health insurer, agreed Monday to the biggest in a series of legal settlements that doctors say will reduce insurance hassles and give them more time to care for patients.



The Indianapolis-based company agreed to pay $198 million to settle a lawsuit by doctors who claim they were repeatedly underpaid by the health care giant. The company also agreed to strict payment schedules.



The doctors see it as their largest victory in an ongoing struggle that is changing the way they interact with insurance companies.



If approved by a federal judge in Florida, the agreement would make WellPoint the sixth national insurer to settle a major class-action lawsuit brought by hundreds of thousands of doctors over health insurance claims. The payout by WellPoint is the biggest yet in the litigation.



The health benefits firm would pay $135 million into a settlement fund for physicians, up to $58 million in plaintiffs' legal fees and $5 million to a not-for-profit foundation that promotes better health care.



Physicians said the settlement would reduce haggling with the insurer and arrange for quicker payment of medical claims, giving them more time to see patients and improve care in states such as Indiana where WellPoint is the major health benefits company.



The plaintiffs include 18 state medical societies and professional organizations representing 700,000 physicians. While Indiana physicians weren't a party to the lawsuit and wouldn't share in the monetary settlement, they would benefit from WellPoint's claims-processing changes.



Those changes, which WellPoint agreed to put in place for four years, "will result in significant savings to physicians in overhead costs and time spent contesting claims," said the plaintiffs. Those savings to doctors could add up to $110 million over the four years, plaintiffs said.



Under the settlement, WellPoint also agreed to:



• Pay electronic claims within 15 days and paper claims in 30 days. Previously, claims processing sometimes took months, the doctors alleged.



• Make its reimbursement fee schedule more readily available for doctors.



• Set up a 12-member committee of physicians to advise the company on health care issues.



WellPoint already was making many of the changes on its own, irrespective of the lawsuit, company spokesman James Kappel said.



"We see this agreement as a very important step in further collaborating with physicians," WellPoint President Larry C. Glasscock said in a statement.



Publicly traded WellPoint will take a $103 million, or 10-cents-a-share, charge in the second quarter to reflect costs of the settlement. The rest of the costs will be paid out of cash reserves that WellPoint set aside in anticipation of a settlement, Kappel said.



The agreement "does not imply that any of our operational practices were improper," Kappel said. The company agreed to the deal, he said, because "it was important to us to put this litigation behind us."



Four companies remain as defendants in the class-action case in Florida that consolidated dozens of lawsuits filed by doctors and their trade associations against health insurers across the nation. Some were filed as many as 10 years ago.



They charged the nation's leading health benefit companies with shortchanging doctors by hundreds of millions of dollars over the years by using tactics to reduce payments for medical claims filed on behalf of insured patients.



The out-of-court deal lets WellPoint avoid a high-stakes jury trial, set to start in January. A jury trial would carry the potential for a big damage award at a time when public sentiment runs strongly against insurance companies and their escalating health premiums.



"WellPoint obviously recognized that a costly trial of any of the disputed issues with physicians would not be in the interest of the company," Archie Lamb, a Birmingham, Ala., attorney who is co-lead counsel for the physicians, said in a statement.



Plaintiffs did not include the Indiana State Medical Association, so doctors in Indiana won't be eligible to share in the settlement, Kappel said. But the business practices WellPoint puts in place would benefit doctors and patients in Indiana and all other states where WellPoint operates, he said.



The Indiana medical association previously said it didn't join the litigation because its members were making headway in dealing with claims-reimbursement problems in private talks with WellPoint.



Last year, 758 consumer complaints alleging late payments and other problems were filed against WellPoint with the Indiana Department of Insurance. That was the most of any health insurer in the state, although the number was on par for a company with a market share the size of WellPoint's.



For WellPoint, the agreement resolves the 5-year-old class-action lawsuit in the Southern District of Florida, before Judge Federico Moreno, plus a separate action brought against the Blue Cross Blue Shield Association, of which WellPoint is a member and licensee.



"It makes a lot of sense for WellPoint to settle," said Michael Obuchowski, a portfolio manager with Altanes Investments, New York. "Whenever there is a large class-action lawsuit, there is increased risk in the minds of investors."



Jay Brown, an insurance lawyer with the law firm of Beirne Maynard & Parsons in Houston, said WellPoint probably wanted to avoid trying a case before jurors in a state that allows awards of triple the actual damages if defendants are found to have acted in bad faith.



"And guess who's going to be sitting on the jury? It's going to be people who've had problems with their insurance companies," Brown said. "Those cases are hard to defend."



Dr. Jack Lewin, chief executive of the California Medical Association, which was part of the settlement, called it "a significant step forward for physicians and their patients. We hope it puts leverage on the other health plan defendants to move ahead and resolve this suit."



Remaining defendants are Humana, UnitedHealth Group, PacifiCare Health Systems and Coventry Health Care.



UnitedHealth vowed to keep fighting the doctors in court.



"We have no interest in settling a purported claim when we in fact did nothing wrong," said UnitedHealth spokesman John Penshorn.



Other companies that have settled include Aetna Inc., Cigna Corp., Prudential Financial and Health Net.