Health insurers agree to pay more than $80 million

Wednesday, May 4, 2005 | 9:14 a.m.

MIAMI -- Health Net Inc. and Prudential Insurance Company of America have agreed to pay more than $80 million to settle claims that they routinely skimped on payments to more than 700,000 physicians.

Health Net will give $40 million to pay claims from doctors and up to $20 million for attorneys fees, the company said. It also agreed to create a better definition of medical necessity for procedures that doctors perform and a streamlined system for physician complaints and payments, moves expected to cost more than $80 million over four years.

The Los Angeles-based company said it will record a pretax charge of about $66 million against earnings in the first quarter due to the settlement.

"This will allow us to continue to enhance our working relationship with the physicians who serve our members. It will put a potentially contentious matter behind us," said Jay Gellert, president and chief executive officer of Health Net.

Prudential agreed to give $22.2 million to pay for efforts to monitor and improve compliance by health maintenance organizations. The New York-based company has sold its HMO business to Aetna. A phone message left with Prudential was not returned.

"This represents a large step forward in the litigation and improvement in the health care delivery system," said Harley Tropin, an attorney for the doctors.

A hearing to get preliminary approval from U.S. District Judge Federico Moreno was set for Friday, and a final hearing will be set later. Moreno's approval would protect Health Net against lawsuits filed in the past decade by physicians and physicians groups.

The doctors alleged that the HMOs conspired from 1990 to 2002 to program their computers to systematically underpay doctors for their services.

Health Net and Prudential were two of eight original defendants. Aetna and Cigna already have settled. Doctors are still pursuing their claims against Anthem, Coventry, United Health and Wellpoint. The case is set for trial in Miami in September.

"We're delighted to have settled, and we look forward to trying the rest of the case against the rest of the defendants in September," Tropin said.

"The remaining defendants continue to prepare for trial and remain confident in their position," their spokesman Mike Hotra said.