Cigna Says It Will Settle Doctors’ Suit

Cigna Corp. confirmed Wednesday that it had reached a tentative $540-million settlement with 700,000 doctors who charged the nation’s third-largest health insurer with routinely underpaying them and with sacrificing patient care.

Cigna also agreed to reduce its claims-processing overhead and to drop its requirement for medical records to support routine claims.

Sources close to the negotiations said Cigna would reimburse claims up to 12 years old, pay all attorneys’ fees on the case and support a new health-care foundation.

The overall value of the settlement was put at $540 million. It will be presented to U.S. District Judge Federico Moreno in Miami today.

The agreement does not have the endorsement of the Illinois physician who led the lawsuit. Dr. Timothy Kaiser complained in a letter to the judge Tuesday about settlement money going to medical societies and doctors’ lawyers. He also questioned parts of the agreement that he called “unintelligible.”

But Dr. Suzanne Corrigan, a Texas pediatrician and class representative, wrote the judge Wednesday to say she was “impressed with the final result” and pleased with the compensation options offered to doctors.

The agreement builds on an earlier $470-million settlement with Aetna Inc. and another Cigna package proposed last November, said Rocky Wilcox, general counsel of the Texas Medical Assn.

Philadelphia-based Cigna agreed to pay a minimum of $70 million to 700,000 doctors nationally, $55 million in attorneys’ fees and $15 million to launch the foundation, sources said.

Doctors can choose one of two ways to seek money under the settlement, which works out to an average of $100 per physician. They can request reimbursement from a $40-million fund based on actual claims, or $30 million will be split among doctors who pick an alternative not tied to claims. The second option would be attractive to retired physicians who no longer maintain their records.

The remaining defendants -- including Anthem Inc., Coventry Health Care Inc., Humana Inc., PacifiCare Health Systems Inc., Prudential Insurance Co., United Health Group Inc. and WellPoint Health Networks Inc. -- are pinning their hopes on an appeal to be argued next week challenging the class-action status unifying the nation’s doctors in lawsuits against leaders of the managed care industry.

Cigna shares rose $1.52 to $49.01 Wednesday on the New York Stock Exchange.