CMA Settles Class-Action Lawsuit With Anthem/Wellpoint
Largest for-profit insurer in California will pay $135 million to
resolve unfair reimbursement allegations during a decade
[Posted 07/11/05]

In a defining moment in their nationwide racketeering case against HMOs, CMA and more than a dozen other state medical associations representing more than 800,000 physicians agreed today to a settlement with Wellpoint/Anthem, the largest remaining health plan defendant in a class action lawsuit in U.S. District Court in Miami.

The settlement provides $135 million in direct payments to physicians resolving allegations of unfair reimbursement for more than a decade by Wellpoint/Anthem, the largest for-profit health insurer in California. U.S. District Judge Federico Moreno must approve the settlement.

The agreement also mandates dramatic changes in Wellpoint/Anthem’s heavy-handed business practices, which will result in prospective relief worth more than $250 million to physicians and their patients. Among other points in the settlement, Wellpoint/Anthem has agreed to a patient- friendly definition of medical necessity and to cease using software programs that systematically lowball or deny payment for legitimate patient claims.

CMA leadership and physicians lauded the settlement, noting that it ends bait-and-switch tactics of Wellpoint/Anthem, which provides insurance to more than 6 million patients in California. Anthem purchased Wellpoint and assumed its name in 2004.

“CMA began the battle against the then-Wellpoint, California’s largest for-profit health plan, five years ago, when it became obvious insurers promised patients one thing in order to sell a policy and then were doing the opposite when it came time to deliver health care,” said CMA President Michael Sexton, M.D. “This is a tremendous victory for physicians and patients.”

CMA leadership called on the remaining defendants—United, Pacificare, Coventry and Humana—to resolve the longstanding case and stop wasting health-care dollars in court. Previous settlements that benefited patients and physicians were reached with Aetna, Cigna, Prudential and Health Net.

“This agreement recognizes a very basic principle: that the physicians’ input is paramount and not to be second-guessed by corporate executives. The Wellpoint/Anthem agreement to implement innovative industry guidelines means that patients will get the quality care they deserve,” noted CMA President-elect Anmol Mahal, M.D. “It is a shame that other health plans are still delaying doing what is right for patients.”

The suit accuses for-profit HMOs of using coercive, unfair, and fraudulent means to control physician-patient relationships, violating federal law. CMA filed the first case in May 2000. In the ensuing years, physician associations from Connecticut, Georgia, Louisiana, Texas, Florida and other states have joined CMA. The suit charges the plans with violating federal civil law under the Racketeer Influenced and Corrupt Organizations Act (RICO) to defraud physicians, enrich themselves at physicians' and patients' expense, break contracts with physicians, and otherwise jeopardize patient welfare.

Under the settlement, Wellpoint agreed to provisions that will pay physicians fairly, provide patients with prompt care and end coercive business practices. The changes are expected to increase predictability and speed of payments on claims, reducing time-consuming and costly administrative burdens for physicians and giving them more time to focus on their central mission–providing health care to patients.

Under the settlement’s provisions that deal with abusive business practices, Wellpoint must:

• Redefine medical necessity so patients are entitled to medically necessary care as determined by a physician exercising clinically prudent judgment in accordance with generally accepted standards of medical practice, and cheaper alternatives are permissible only when they are “at least as likely to produce equivalent therapeutic or diagnostic results.”
• Halt so-called down-coding and other systematic rewriting and devaluing of (CPT) treatment codes by software programs, such as the practice of routinely denying payment for multiple procedures performed on the same day.
• End unilateral changes to physician contracts made with less than 90 days written notice and disclose claims adjudication logic.
• Remove disparaging language about physician fees from explanation of benefit forms.
• Improve its arbitration system to reduce the burden on physicians, including barring provisions that require arbitrations take place more than 50 miles from a physician’s office and reimbursing the arbitration fees for physicians who prevail.

Several CMA members, including plaintiff physicians, noted that the quality of health care is maximized when physicians and patients work in concert with the insurer.

CMA CEO Jack Lewin, M.D., said he hopes the agreement will usher in a constructive working relationship among physicians and Wellpoint. “While Wellpoint, the largest for-profit HMO in California, enjoys a reputation on Wall Street for excellent business management, its relationship with physicians has been on an increasingly sharp downhill slope for more than a decade,” Dr. Lewin said. “This settlement opens the door for a long-overdue and much-improved relationship, including the opportunity to work together to improve patient care and patient safety.

More information on CMA's RICO lawsuit is available in the RICO Resource Center.

Contact: CMA's legal information line, 415/882-5144 or legalinfo@cmanet.org.