In a move that caught many off guard, a federal judge in Miami delayed granting final approval to a $470 million settlement reached by Aetna and more than 950,000 doctors who say they routinely were shortchanged by the nation's largest health insurers.
U.S. District Judge Federico Moreno, who gave a preliminary go-ahead to the deal in May, said at a final hearing last week that he would need a week or more to review objections raised by a handful of plaintiffs, citing concerns that many physicians did not fully understand how much they were entitled to receive.
"One of the main objections is the doctors don't know exactly what the value of the case is," Moreno said during the five-hour hearing. The settlement, if approved, would officially end Aetna's involvement in a massive racketeering class-action lawsuit first filed in 1999 on behalf of more than two dozen state medical societies.
While many of the more than 100 lawyers involved had expected an immediate approval, Aetna officials said they were neither surprised nor disheartened by Moreno's decision to take time before ruling. "In most major settlement cases, it would be unusual for a judge to rule from the bench," Aetna spokesman David Carter said. "We remain optimistic. ... We believe we've adequately addressed all the concerns that were raised."
Under the proposed settlement, Hartford, Conn.-based Aetna has agreed to pay $100 million to reimburse doctors for denied claims, $20 million to create a new healthcare foundation, $50 million in legal fees, and $300 million to overhaul its claims-processing system and improve communication with physicians.
But lawyers for doctors who opposed the settlement said their clients did not receive adequate notice of the deadline to opt out or were not given enough detail to decide. According to Aetna officials, only 11,000 of the doctors, or 1%, opted out of the settlement, allowing them to pursue their claims against the insurer individually.
Plaintiffs' lawyers also argued that the changes promised by Aetna are mandated by the federal Health Insurance Portability and Accountability Act and various state prompt-payment laws, and therefore should not count as part of the settlement. Aetna, however, contends that its efforts go far beyond what the law required.
Specifically, doctors would receive payment within 15 days for claims filed electronically and would face fewer precertification requirements, while Aetna would be prohibited from changing its fee schedule more than once a year or from "downcoding" claims to prevent physicians from receiving full payment for treatment.
William Popik, Aetna's chief medical officer, said the company also is the first to launch a Web site that lets its 579,000 physicians view a list of the procedures the company covers, how much the treatments cost and how the billing codes submitted for payment will be handled. Doctors also will be able to track the status of their claims online.
"Claims processing has been a major source of tension between health plans and physicians for years," Popik said. "These new tools create greater transparency and should eliminate surprises in the way bills are paid."
To further improve relations with doctors, Aetna is establishing a nine-member physician advisory board, chaired by Popik, that will provide continued input on issues of common concern to doctors. The insurer also has amended its definition of "medical necessity" to bring it more in line with that of the American Medical Association.
While the AMA's guidelines require treatment decisions to be based on a physician's "prudent clinical judgment," Aetna traditionally has approved treatments based on which was the least costly option among scientifically proven procedures. Now, the company will combine these concepts.
Still, Moreno raised concerns that a full three-quarters of the $100 million in cash set aside to repay physicians would end up not in doctors' pockets but in the new foundation, designed to tackle key healthcare issues such as childhood obesity, medical errors and racial disparities.
That's because the vast majority of eligible physicians either failed to claim their portion of the settlement-expected to range from $55 to $210 per plaintiff-or chose to donate it to the foundation. The proposed settlement stipulates that unclaimed money would be added to the foundation.
Moreno initially indicated that the now-$95 million foundation could prove a deal-breaker, questioning whether it would serve as anything more than "a think tank where good people discuss the issues of the day." But the judge later accepted lawyers' assurances that it would achieve some greater good in improving healthcare, Aetna spokesman Carter said.
Moreno cannot alter the settlement; he must approve or reject it in its proposed form. Carter declined to say what Aetna would do if the deal were rejected.
The company has much at stake. The four-year legal battle has cost the 13 million-member insurer roughly $40 million annually in legal fees and has proved a major management distraction, Popik said. What's more, if Aetna were forced to go to trial, it would risk having to pay triple damages, as dictated by federal antiracketeering law.
Moreno's decision also could have implications for Philadelphia-based Cigna Corp., which last month won preliminary approval for a similar settlement. Cigna's proposed agreement sets aside $70 million to reimburse physicians, $15 million to create a foundation, $55 million for legal fees and up to $400 million to modify the insurer's claims-processing practices. Moreno is scheduled to hold a final hearing on that settlement Dec. 18.
Meanwhile, the other defendants-Anthem, Coventry Health Care, Health Net, Humana, PacifiCare Health Systems, UnitedHealth Group and WellPoint Health Networks-said they will go to trial rather than settle out of court and have challenged the case's class-action status before the 11th U.S. Circuit Court of Appeals in Atlanta.