Aetna Inc., one of the nation’s largest health insurers, is expected today to break ranks with other leading managed-care companies by announcing a $470-million settlement of a racketeering lawsuit brought by 600,000 doctors across the nation.
As part of the settlement, Aetna will pay the doctors $100 million and make notable changes in the way it reimburses physicians and considers their treatment recommendations, according to sources familiar with the agreement. The changes, which are expected to result in more accurate and prompt payments, will be worth an estimated $300 million over several years, the sources said Wednesday.
Aetna’s decision to settle was seen as a surprising turn of events in a landmark class-action lawsuit filed in 2000 by doctors and medical associations in California and several other states against eight of the nation’s biggest managed-care companies. They include WellPoint Health Networks Inc. of Thousand Oaks and Health Net Inc. of Los Angeles.
The California Medical Assn., which represents 34,000 doctors, wouldn’t comment, except to say that it has scheduled a news conference for today.
Executives at Aetna, based in Hartford, Conn., also declined to comment. Sources say the company isn’t expected to admit any wrongdoing in settling the case.
The case is national in scope but has particular resonance in California, which has been a pioneer in managed health care and a major battleground for disputes between doctors and patients on one side and insurance companies on the other.
“Aetna has agreed that the doctors’ position in the health-care equation must be elevated,” said Archie Lamb, co-lead counsel for the plaintiffs, who added that all plaintiffs had agreed to Aetna’s offer, which must be approved by a judge.
As word spread in the industry Wednesday of Aetna’s expected announcement, representatives of other health insurers named in the lawsuit expressed surprise and dismay. Although they wouldn’t comment on the record, company representatives and lawyers close to the case privately grumbled, saying it appeared to be an effort to drum up business by creating a more doctor-friendly image for the company.
“They’re obviously cuddling up to the physician community,” said one health insurance representative.
He and others said it was unclear how Aetna’s decision would affect the other health plans that are defendants in the suit. The joint defense team is expected to meet today, he said.
Marcy Zwelling-Aamot, a Long Beach internist and president-elect of the Los Angeles County Medical Assn., said she expected Aetna’s settlement to influence any resolution with the remaining defendants.
“Aetna will probably set the precedent for any other settlement,” she said. “No doctor is going to take less than that.”
The suit against Aetna and the seven other companies was filed in 2000. It accused the big health insurers of systematically cheating doctors out of fair payments by, among other things, deliberately delaying payment or simply not paying what the doctors believed they deserved.
Filing the suit under the federal Racketeer Influenced and Corrupt Organizations Act allowed the plaintiffs to claim that a systematic and ongoing effort had been made to deprive them of their rightful earnings.
Backing the doctors in the suit were the state medical associations in California, Georgia, Texas, Florida and Louisiana.
In September 2002, a federal judge in Miami ruled that plaintiffs’ lawyers could group the claims of the physicians into a class-action suit. U.S. District Judge Federico Moreno noted the various claims brought by doctors cited one common practice: the automated “down-coding” of medical services, resulting in doctors getting paid less than what they billed.
The plaintiffs have “done more than just allege a common scheme but ... have demonstrated facts that support its existence,” Moreno wrote.
In the same decision, Moreno denied class certification to an estimated 145 million patients covered by health maintenance organizations run by the defendants -- meaning that those patients would have to pursue their claims in individual suits.
Last month, a unanimous U.S. Supreme Court released PacifiCare Health Systems Inc. of Cypress and UnitedHealth Group Inc. of Minnesota from the suit.
The high court said that because the two companies had arbitration agreements with their doctors, the doctors were bound by those agreements to first go to arbitration, preventing physicians from taking their racketeering claims directly to the courts.
In the settlement accord, sources said, Aetna promised to donate $20 million to establish a foundation that would work to reduce childhood obesity, improve end-of-life care, treat the uninsured and end ethnic and racial discrimination in health care.
Aetna also agreed to pay an additional $50 million to cover the plaintiffs’ legal fees. To cover that, Aetna is expected to announce that it will take a $75-million after-tax charge in the second quarter.