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UnitedHealth Settlement Near, but Faces a Protest
By Reed Abelson
New York Times
Friday, January 16, 2009

The insurance giant UnitedHealth Group said Thursday that it had reached a $350 million deal to settle class-action lawsuits claiming it had underpaid patients and doctors.

Not so fast, said one of the lawyers for the plaintiffs.  She says the money is not enough and has filed an objection with one of the judges overseeing the cases.

“We believe the amount agreed to is inadequate and does not reflect as meaningful a settlement as could be negotiated,” said the lawyer, Barbara Quackenbos, whose firm is one of several handling the cases on behalf of patients and doctors.

The UnitedHealth announcement came after a related settlement the company announced earlier this week with New York’s attorney general, Andrew M. Cuomo, in which the company agreed to stop operating the databases used by the insurance industry to calculate payments to patients when they use doctors outside the insurer’s preferred network of physicians.

In Thursday’s announcement, UnitedHealth hailed the proposed class-action settlement as resolving numerous lawsuits around the country by patients and doctors claiming that the out-of-network payments were too low for many years.

“We are pleased to have reached an agreement that provides closure on these matters,” Mitchell E. Zamoff, a senior lawyer for UnitedHealth, said in a statement.

But the objections of Ms. Quackenbos and some of the other lawyers involved make it less clear whether the two federal judges, one in New York and the other in New Jersey, overseeing the lawsuits will approve the settlement as outlined by UnitedHealth.

Earlier this year, in a case involving similar issues but a much smaller insurer, Health Net, the same New Jersey judge approved a $255 million settlement. Ms. Quackenbos, whose Woodbridge, N.J., firm Wilentz, Goldman & Spitzer represented plaintiffs in that case, said that by the Health Net standard, the UnitedHealth settlement should be larger than $350 million.

The proposed settlement covers three lawsuits against UnitedHealth, including one brought in federal court in New York by the American Medical Association and others.

Asked later in the day about the objections of Ms. Quackenbos, the company issued a statement:  “This agreement was the product of vigorous arm’s-length negotiations and is supported by the American Medical Association, the Medical Society of New York and experienced class counsel.  The New York attorney general commented favorably on the settlement today.  We are confident the agreement will be approved by the court.”

Mr. Cuomo had indeed referred to the settlement Thursday, as he announced his own agreement with another insurer, Aetna, on the industry database issue.  Asked later about the objection of Ms. Quackenbos, he said the exact amount of any settlement was a matter of private litigation and subject to final court approval.

Insurers typically agree to pay 70 to 80 percent of the “reasonable and customary” local market rate for out-of-network medical services.  An investigation by Mr. Cuomo’s office concluded that the database had understated the true market rates of medical care by up to 28 percent.

The proposed settlement with UnitedHealth covers those patients with out-of-network claims and their doctors whose reimbursements were determined using the customary and reasonable rates.  If it is approved, the $350 million will be distributed to both patients and doctors, although the details of how the money will be allocated have not been completed.

Anyone who is eligible under the settlement will be notified in writing or through advertising, a UnitedHealth spokesman said.

Aetna, another big insurer in New York, announced on Thursday an agreement with Mr. Cuomo’s office to contribute $20 million toward the new databases.  UnitedHealth has agreed to contribute $50 million.  Both have agreed to use the new databases.

Mr. Cuomo said he would try to persuade the rest of the insurance industry to support and use the new databases under the independent operator as a way of helping patients in the future.  “We will not stop until the entire industry has been reformed in this regard,” he said.

Aetna faces some lawsuits over the same issues as UnitedHealth.  The company says they are still pending and it plans to defend itself vigorously against the accusations.

http://www.nytimes.com/2009/01/16/business/16health.html?ref=business