WellPoint Settles RICO Law Suit

As reported in the Los Angeles Times (and elsewhere), WellPoint has recently agreed to settle its role in a class-action lawsuit brought by California physicians under the RICO (Racketeer Influenced and Corrupt Organizations) standard. WellPoint will pay about $198 million, including $135 million in damages to physicians, $5 million to set up a foundation to improve medical practices, and up to $58 million in attorney's fees. WellPoint, lead by Chief Executive Officer Larry C. Glasscock (2005 total compensation according to Forbes, $24, 970,000), is the largest health care insurer in the US.
The suit charged that WellPoint systematically denied and under-payed physicians' claims. According to the Times, "it includes a ban on WellPoint's alleged use of computer programs to systematically deny and underpay purportedly legitimate claims." (Ah, the uses of health care information technology....) Glasscock commented, "we see this agreement as a very important step in further collaborating with physicians."
The class-action suit originally targeted ten insurance companies/ managed care organizations. Those that have already settled included Aetna, Health Net Inc., Prudential Financial Inc., and Cigna Corp. Those that have not settled so far include UnitedHealthGroup and Pacificare, which just merged. (See post here.)
Juxtaposed with our previous two posts, it appears that some managed care companies vigorously tried to control costs by across the board cuts of payments to physicians, while they seemed to ignore the high prices charged for supposedly "high tech" drugs and devices. But why?

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