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Thursday, Mar 28, 2024

Health Insurers Finally Settle Long-Standing Class Action Suits

Two of the largest health insurers in the country in 2005 settled class action lawsuits with physicians dating back to the beginning of the decade. In July, WellPoint agreed to pay up to $200 million after plaintiffs claimed that the companies were letting hospitals overbill members for services that insurers failed to cover. WellPoint owns Thousand Oaks-based Blue Cross of California. The suit’s plaintiffs included over 700,000 physicians across the country. The settlement, which must be approved by a judge before the suit can be officially dismissed, was hailed by physician advocacy groups as a landmark for the health care industry. The California Medical Association said it will allow physicians, rather than insurance companies, to decide what care is medically necessary and that it will force insurance companies to improve arbitration systems to place less of a burden on physicians. Woodland Hills-based Health Net also agreed to settle the lawsuit. WellPoint Plans Purchase Indianapolis-based WellPoint, already the largest health insurer in the country, announced in July that it was planning to buy WellChoice Inc., in a deal worth more than $6.5 billion. WellPoint was formed in 2004 when Indianapolis-based Anthem merged with Thousand Oaks-based WellPoint. The deal was positive news for both companies’ stock prices, but some groups like the American Medical Association warned that mergers of giant companies rarely produce benefits for consumers. The Medical Society of the State of New York said the merger might also be bad for doctors since it could give the larger company the ability to decide which procedures its member doctors can and cannot perform. Hospital Sale In October, Sherman Oaks Hospital announced that it would be purchased by Prime Health Care Services in Victorville, which owns two other small hospitals in Southern California. Sherman Oaks CEO David Levinsohn said that the hospital was losing too much money and had been looking for additional financing for the preceding months. Ultimately hospital management found no way to pay for necessary expansion and up-to-date equipment without selling the facility. The state attorney general is expected to give final approval of the deal soon. Prime would pay $17 million to purchase the hospital and has announced its intentions to invest close to $20 million more for hospital expansion and equipment upgrades. Health Net Action Health Net saw its stock price more than double in 2005, and also launched a major advertising campaign for the first time in several years. The Woodland Hills-based insurer renewed its Medi-Cal contract in Los Angeles County and expanded into several other California counties during the year. Health Net also saw increased business in its Tricare military health care policies. Health Net has been considered by industry watchers to be a prime takeover target. In 2005 it increased its rates, which caused some members to leave but enabled the company to increase its revenue and net income, and executives at an annual investors’ conference said the company has diversified its business to strike a better balance between commercial and Medicare operations. New Drug Plans Insurers across the country rushed to apply to participate in the federal government’s Medicare Part D Prescription Drug Plans, which represent the most drastic overhaul of the government’s health care program since it was created. Blue Cross of California, Health Net and Kaiser Permanente have begun enrolling their senior citizen members in plans that will cover prescription drugs for as low as $18 per month. New Medical Center While hospitals are struggling to stay open, Providence Health System opened its Providence Holy Cross Health Center to serve the Santa Clarita Valley. The center is part of the 80,000 square-foot Santa Clarita Valley Medical Plaza, a joint venture between Providence, Facey Medical Group and other investors. The facility will house physicians’ offices as well an outpatient cancer center, a surgery center, imaging laboratories, a pharmacy and other services. Medi-Cal Cuts In December, Gov Schwarzenegger announced that Medi-Cal, the state’s insurance program for low-income residents, would cut reimbursement rates throughout 2006. State officials say that the rate cut is necessary in order to keep California’s budget in balance. Critics of the rate cut say that California doctors already deal with the lowest reimbursement rates in the country, and that another cut will force more of them to stop seeing Medi-Cal patients, thus restricting more Californians’ access to health care.

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