Aetna Inc (AET.N), the third-largest U.S. health insurer, has agreed to pay as much as $120 million to settle nationwide litigation over how it reimburses members for out-of-network medical services.
The accord calls for Aetna to pay $60 million into a general settlement fund, plus as much as $60 million more, depending on how many people submit claims.
Aetna said it will take a $78 million after-tax charge in the current quarter for the settlement, and that the charge will not affect operating earnings. It expects to pay for the settlement over the next one to two years.
Patients and doctors accused Aetna of using databases provided by Ingenix Inc, a unit of UnitedHealth Group Inc (UNH.N), to systematically underpay claims involving services and supplies from out-of-network providers.
The Hartford, Connecticut-based insurer was also challenged over how it calculated out-of-network reimbursement rates, and over its disclosures about those calculations.
"It continues to be a problem that insurers use improper bases to pay low reimbursement rates," said Joe Whatley, a lawyer for the out-of-network providers, in a phone interview. "We hope this settlement will deter similar conduct."
In a joint court filing on Friday, the plaintiffs and Aetna said the accord was "adequate, fair and reasonable."
It would cover patients who used out-of-network providers from March 1, 2001, to the present, and cover out-of-network providers from June 3, 2003, to the present. The litigation began in July 2007.
"We are pleased that we were able to reach a favorable agreement," James Cecchi, lead lawyer for the plaintiffs, said in a phone interview.
The settlement requires approval by U.S. District Judge Stanley Chesler in Newark, New Jersey. Aetna said it expects approval in the middle of 2013, and that it may void the settlement if too many people decide not to participate.
On January 13, 2009, UnitedHealth and Aetna agreed to stop using the Ingenix database and to help fund a new independent database to calculate rates, under agreements with then-New York attorney general, Andrew Cuomo, who is now the state's governor.
Two days later, UnitedHealth agreed to pay $350 million to settle lawsuits over its out-of-network reimbursements.
In early afternoon trading, Aetna shares were up 1.9 percent at $44.24 on the New York Stock Exchange.
The case is In re: Aetna UCR Litigation, U.S. District Court, District of New Jersey, Nos. MDL-2020 and 07-03541.
(Reporting by Jonathan Stempel in New York; editing by Gerald E. McCormick, Sofina Mirza-Reid and Matthew Lewis)