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Indianapolis-based Wellpoint Health Networks agreed Monday to pay almost $200 million to get out of a class action lawsuit filed by doctors against HMOs, alleging the insurance companies conspired to defraud them. The lawsuit on behalf of 700,000 doctors against some of the nation’s largest health insurance companies, accuses the health maintenance organizations of racketeering. It contends the companies improperly rejected patient claims and developed software to automatically reduce payouts to doctors for patient treatment. The Wellpoint settlement, which earmarked $135 million to the doctors, $5 million for a nonprofit company aimed at improving health care, and up to $58 million in legal fees, was submitted to U.S. District Judge Federico Moreno in Miami on Monday. Attorneys for the physicians and the doctors are scheduled to appear before Moreno on Wednesday to discuss the terms of the proposed settlement. Wellpoint was one of 10 major health care providers named in the suit, filed in 2000. Six of the 10 health care providers have already reached settlements approaching $1 billion. The companies that settled are Health Net, Prudential Insurance of America, Aetna, Cigna and Anthem. Anthem merged with Wellpoint late last year. The remaining defendants are Humana, Coventry and United Health and PacifiCare, which recently merged. A trial had been set for September, but it was postponed until January, according to Archie Lamb, co-counsel for the physicians. Lamb said Moreno ordered the parties into settlement negotiations, but Lamb declined to discuss the talks. The latest settlement comes in the wake of two significant losses for the insurance companies before the U.S. Supreme Court, which declined to hear appeals from the 11th U.S. Circuit Court of Appeals that were unfavorable to the defendants. In May the Supreme Court rebuffed the insurance companies’ effort to block the trial pending the outcome of arbitrations. In January, the court opted against taking up the lower court’s decision that allowed the case to proceed as a class action. Lamb said the appellate victories have helped the doctors in settlement talks. “The Supreme Court’s rejection of any appeals certainly was a good thing for us, but the role it played in the settlement, [the defendants] need to answer,” he said. Kent Jarrell, spokesman for the defendants, commented briefly on the case, saying that the final four insurance companies would continue to fight. “The remaining defendants are committed to vigorously pursuing the litigation and are preparing for trial, which is currently scheduled for early this year,” Jarrell said. “The defendants are confident of prevailing at trial because of the evidence.” Lamb said the settlement reached with Wellpoint was similar to the previous settlements in the case. It redefines the industry standard of “medical necessity” to make it easier for a doctor to treat a patient and then get reimbursed by the insurance carrier. “The medical necessity provision in the settlement is designed to remedy some of the abuse of the managed care industry,” said Tim Norbeck, president of the Connecticut State Medical Association. “Managed care entities have had definitions of medical necessity more based on cost than clinical necessity of care.” Under the settlement medical necessity will be defined by clinical need. “This is a definition that is much more patient friendly, rather than HMO friendly,” Norbeck said. The settlement also calls for an external review board to resolve disputes over reimbursements between doctors and insurers.

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