Aetna Settles With 700,000 Doctors

American actress Halle Berry, left, dances with Australian actor Hugh Jackman during a photo op for the film "X-Men: The Last Stand," at the 59th International film festival in Cannes, southern France, on Monday, May 22, 2006.
AP Photo/Jeff Christensen
Aetna Inc. has agreed to a $470 million settlement with more than 700,000 doctors who alleged in a class-action lawsuit that insurers wrongly cut payments to them and interfered with their recommended treatment for patients.

Under the settlement announced Thursday, Aetna said it will revamp its bill payment systems, set up a panel of doctors to advise it on issues important to physicians and establish a foundation to improve the quality of health care.

"We believe that entering into this settlement will permit us to work better with physicians, and that's really what our business is all about," Aetna president Ron Williams told CBS Radio News. "We want to pay physicians' claims in a timely and accurate way, and we want physicians focused on delivering care, making sure our members are receiving access to the health care services that are essential for them."

Aetna is the first insurer to settle a number of doctors' lawsuits, some dating back four years ago, that have been consolidated in U.S. District Court in Miami.

"We believe that this is a model" for the other nine insurance carriers involved in the suits, said Williams. "We encourage other members of the industry to examine this carefully."

The proposed settlement requires approval of the federal court.

Aetna, Cigna Corp., UnitedHealth Group Inc., Wellpoint Health Networks Inc., Anthem Inc., Humana Inc., PacifiCare Health Systems Inc. and other managed care companies are accused of improperly denying and delaying payments to physicians.

The suits allege that insurers used their coercive economic power to force doctors into unfavorable contracts and used pay schemes — including tests and referrals to specialists — to reduce the amount of care.

Aetna said that its proposed settlement was reached with representatives of more than 700,000 physicians, state and other medical societies.

The settlement calls for Aetna to pay $100 million to doctors and $20 million to allow doctors to establish a foundation aimed at reducing medical errors, childhood obesity and racial disparities in treatment. Aetna also would pay up to $50 million in plaintiffs' legal fees.

Physicians also would gain an estimated $300 million over several years from the changes Aetna has agreed to make in systems to speed up payments to doctors and eliminate cuts to reimbursements that may have made under the previous systems.

"The American Medical Association expects this settlement to raise the bar for the entire health insurance industry on fair and open business practices," said Donald J. Palmisano, a physician and AMA president-elect.

Aetna said it would take a $75 million charge against earnings, on an after-tax basis, to account for the settlement. The company reported a $330 million net profit in this year's first quarter.

Health plan members also filed numerous lawsuits that were consolidated in Miami, but the heath insurers have been settling those lawsuits for smaller amounts, usually $2,500 to $20,000, The Courant reported.

The court did not grant class-action status to the members' lawsuits, which limited recovery of damages. The physicians' suits, however, were granted class-action status last fall, giving insurers more incentive to settle.