Health Net Settlement Overview

    (Agreement dated May 2, 2005; Final Approval on Sept. 19, 2005)

    The following is a general overview of the major provisions of the Health Net Settlement likely to be of interest to physicians. It is not intended to be comprehensive. The prospective relief noted below generally extends for four (4) years from the date it is implemented, unless terminated earlier as specified in the Agreement.  See below for the relevant start dates . Physicians interested in the specifics should read the language of the actual Settlement Agreement, which is posted at  www.hmosettlements.com .

    Retrospective Relief:

    • $39,000,000 to class members, without any requirement for the submission of medical records. (§8)
    • $1,000,000 to the Compliance Fund to be used for monitoring and enforcing compliance with the Settlements. (§8)
    • The deadline for claims filing is September 21. 2005.

    Prospective Relief: Over $80 million

    • Better Medical Necessity Definition - Patients will be entitled to receive medically necessary care as determined by a physician exercising clinically prudent judgment in accordance with generally accepted standards of medical practice, and cheaper alternatives are permissible only when they are "at least as likely to produce equivalent therapeutic or diagnostic results." (§7.16)
    • Payment of Vaccines and Vaccine Administration - Recommended vaccines and injectibles and the administration of such vaccines and injectibles, will be reimbursed. (§7.14)
    • Reduced Downcoding - Evaluation and management CPT codes will not be automatically downcoded or reassigned. (§7.19)
    • Fewer Contract Changes - No material adverse change to a contract may be made on less than 90 days written notice. (§7.6)
    • Fairer Payment Rules - CPT coding edits will comply with most of the guidelines contained in the AMA CPT Manual. (§7.20)
    • Most Favored Nation Clauses Prohibited - Health Net will not include any "most favored nation clause" in its contracts with physicians. (§7.29)
    • Consistency and Disclosure of Payment Rules - Payment rules will be consistent across all of Health Net's commercial products within each separately licensed health plan by December 31, 2005. Moreover, most reimbursement edits and claims adjudication logic will be disclosed. (§7.8)
    • Capitation from Date of Enrollment - Capitation fees will be paid when the patient chooses a PCP or is assigned to a PCP, retroactive to date of enrollment. (§7.28)
    • All Products and "Other Payor " Clauses Prohibited - Health Net will not require physicians to participate in products they do not want to participate in, including but not limited to products the Company offers to workers' compensation payors. (§7.13) Moreover, Health Net will not require physicians to be "leased" to entities other than Health Net, its affiliates, or their self-funded plans' customers. (§7.29)
    • Stop-loss Insurance May be Purchased Elsewhere - Health Net will not restrict physicians from purchasing stop-loss coverage from other insurers. (§7.29)
    • Faster Credentialing - New physician group members will be credentialed within 90 days of application, which physician groups can submit prior to their employment, and little or no additional credentialing will be required when already credentialed physicians change employment or location. (§7.13)
    • Arbitration Fees Capped - For solo and small group physicians arbitration fees will be capped at $1000 and Health Net's participation contracts will not require that arbitrations take place more than 100 miles from the physicians' office, or that there be multiple arbitrators for disputes of less than $500,000. (§7.29)
    • Prompt, external dispute resolution mechanism for physician disputes - A streamlined, external review system will be established enabling physicians to dispute Health Net's decisions on billing or medical records requests (Billing Dispute External Review Board) and on medical necessity (Medical Necessity External Review Process). (§§7.10, 7.11)
    • Gag clauses prohibited - "Gag" clauses will be prohibited. (§7.29)
    • Non-participating physicians protected - Disparaging language will be removed from EOBs , and the Agreement will not change or alter the rights of non-participating physicians to balance bill patients or to avoid dealing with Health Net. (§§7.21 and 7.29) Moreover, Health Net will identify "the data used … to determine the "reasonable and customary" charge" whenever any specific determination is challenged. (§7.14)
    • Limitation on Rental Networks - Health Net will disclose on each EOB or remittance advice the identity of any PPO discount it is claiming, and within 30 days of a physician's request, will provide the physician with a copy of the signed agreement between the physician and that PPO, or else Health Net will not be entitled to that discount. (§7.29)
    • No HIPAA Mandate - Non-participating physicians will not be forced to use electronic transactions or otherwise become HIPAA compliant, and Health Net agrees to continue to accept paper claims. (§7.17)
    • Restrictive Endorsements Limited - When the check is a partial payment of allowable charges, physicians may cash a check with "Payment in Full" on it without waiving the right to pursue a remedy under the Settlement. (§7.29)
    • Better Mental Health Coverage - Health Net will generally apply the §7.16 definition of medical necessity described above to mental health care, including treatment for psychiatric illness and substance abuse, it will treat its participating psychiatrists like its other participating physicians with respect to its provider directories and referrals, and it will adhere to the "prudent lay person standard" for emergency services, including admission, or physical or chemical restraints. (§7.33)
    • Better state and federal law supercedes the Agreement . (§7.29)

     

    Enforcement of Settlement Agreement

    • A Physicians' Advisory Committee will be created to address issues of statewide or greater scope. (§7.9)
    • Physicians and signatory state medical societies will enforce the Agreement, including Health Net's agreement to abide by those laws that are more protective of physicians than the provisions otherwise contained in the Agreement, exclusively through an efficient "compliance dispute" resolution process. The United States District Court Judge handling the litigation will have ultimate enforcement power. (§12)
    • Physicians and signatory state medical societies retain the right to seek the enactment of better state laws and regulations, and to enforce those better protections. (§13.9)

    Coverage:

    • The Settlement covers all physicians (over 700,000 physicians, physician groups and physician organizations) who have provided covered services to any person enrolled in or covered by a plan offered or administered by any of the defendants named in the complaint (including Aetna, CIGNA, Prudential, Humana, WellPoint, Pacificare , Health Net, Anthem, United and Coventry). 
    • The Settlement also includes the following 15 Signatory Medical Societies: California, Connecticut, El Paso County (Co), Florida, Georgia, Hawaii, Louisiana, Nebraska, New Jersey, North Carolina, Northern Virginia, South Carolina, Tennessee, Texas and Washington.

    Distribution of Monetary Relief

    • Retired Physicians who file valid claims will receive their pro rata share of the Retired Physician Amount, which will he calculated based on the number of retired physicians who file valid proofs of claim (they receive more than Active Physicians because they will not directly benefit from the prospective relief).
    • Active Physicians will be entitled to receive the portion of the Settlement Fund that is available after subtracting the Retired Physician Amount.
    • Each Active Physician who files a valid Proof of Claim will receive an amount based on the physician's gross receipts for providing covered services to Health Net Members during a three-year calendar period, depending on whether those receipts were less than $5,000 (entitling the physician to a single base amount) at least $5,000 but less than $50,000 (entitling the physician to five times the base amount), or $50,000 or greater (entitling the physician to ten times the base amount), regardless of whether these amounts were paid by Health Net or one of its delegated entities. The calculations will be based on Health Net's records for the period 2002-2004, unless the Physician wishes to submit his or her own proof of payment. Physicians who received payment for services to Health Net members from an IPA or other delegated entity or who had larger gross receipts in an earlier three-year period should elect this option, and submit 1099s or other documentation reflecting payments from those organizations, supplemented with a letter certifying what percentage of that payment was from Health Net and/or its subsidiaries.
    • In determining the amount of gross receipts, Physicians may only count payments from Health Net and its subsidiaries and affiliates which include: Health Net of California, Inc., Health Net of Arizona, Inc., Health Net of Oregon, Inc., Health Net of the Northwest, Inc., Health Net of Connecticut, Inc., Health Net of New York, Inc., Health Net of New Jersey, Inc., Health Net of Pennsylvania, Inc., plans that were formerly associated with Foundation Health Corporation, Inc., such as Intergroup Prepaid Health Services of Arizona, Inc., Intergroup of Utah, Inc., CareFlorida Health Systems, Inc., Community Medical Plan, Inc., S. Colorado Health Plan, Foundation Health, A California Health Plan, Inc., Foundation Health, A Florida Health Plan, Inc., Foundation Health, A Colorado Health Plan, Inc., Foundation Health, A Louisiana Health Plan, Inc., Foundation Health, A Texas Health Plan, Inc., and Foundation Health, A Oklahoma Health Plan, Inc., plans that were formerly associated with QualMed , Inc., such as QualMed Plans for Health, Inc., QualMed Plans for Health of Ohio and W. Virginia, Inc., QualMed Plans for Health of Pennsylvania, Inc., QualMed Colorado Health Plan, Inc., QualMed Oregon Health Plan, Inc., QualMed Plans for Health New Mexico, QualMed Washington Health Plan, and Preferred Health Network, Inc., plans that were formerly associated with Health Systems International, Inc., such as MD Health Plan, Greater Atlantic Health Services, Inc., Advantage Health, and Pennsylvania Health Care Plan, Inc., plans that were formerly associated with Foundation Health Systems, Inc. such as First Option Health Plan of New Jersey, Inc., First Option Health Plan of Pennsylvania, Inc., PACC HMO/PACC Health Plans, Physicians Health Services ("PHS"), Inc., PHS of New York, Inc., PHS of New Jersey, Inc., and PHS of Connecticut, Inc., and others (collectively "Health Net").
    • Even if you never treated a Health Net enrollee, you are entitled to damages if between January 1990 and May 10, 2005 you treated any enrollee of any of the ten defendant health plans: Aetna, Anthem, Coventry, CIGNA, Humana, Health Net, United, PacifiCare, Prudential and/or WellPoint; and you have not opted out of the Health Net Settlement. Class Members who never treated a Health Net enrollee are entitled to claim the Base Amount (check the 1 st box in Section II) or, if retired, to claim as a retired physician, pursuant to Section I.
    • Physicians who do not specify a category of gross receipts will be deemed entitled to a single base amount.
    • Each Retired Physician and Active Physician has the option of receiving payments or directing his or her amount to his/her signatory medical society foundation, or the Foundation created by the CIGNA Settlement, the Physicians' Foundation for Health Systems Innovations.
    • Physician Groups may submit claims on behalf of Physicians employed or otherwise working with them at the time the claims are submitted, but only to the extent these Physicians do not submit individual claims. Physician Groups should file the claim form using the group's tax ID number and address, and attach a list of the names and Social Security Numbers of the individual physicians on whose behalf the group is claiming, and the category of gross receipts applicable to each physician, as discussed above. The claim form should be signed by the Medical Group's President or by another individual who has authority to represent the listed physicians.
    • It is suggested that Physicians send claim forms via certified mail so they have proof the documents were sent out on time.

     

    Implementation Dates for Section 7 Commitments

    Section
    Description
    Implementation Date

    7.1

    Automated Adjudication of Claims

    5/2/05

    7.2

    Increased Intranet and Clearinghouse Functionality

     

     a

    Investments/Requirements

    Effective Date + 90 days

     b

    Electronic Transactions

    Effective Date + 90 days

     c

    Website Access-Facilitator/Medical Societies

    9/7/05

    7.3

    Availability of Fee Schedule/CPT Code Inquiries

    Effective Date + 120 days

    7.4

    Provider Relations Investment

    5/2/05

    7.5

    Reduced Pre-certification Requirements/ Disclosure

     

     a

    Reduced Pre-certification Requirements

    11/6/05

     b

    Disclosure of Pre-certification Requirements

    11/6/05

     c

    Disclosure of Customized Pre-certification List

    11/6/05

    7.6

    Material Adverse Charge Notice

    7/9/05

    7.7

    Initiatives to Reduced Claims Resubmissions

    11/6/05

    7.8

    Disclosure of Commitments Concerning Claims Payment Practices

     

     a

    Consistency of Claim Payment Practices

    The later of the Effective Date or 12/31/05

     b

    Certain Claims Bundling Logic

    Effective Date + 90 days

     c

    Request for Clinical Information

    Effective Date + 90 days

     d

    Claims with Modifiers 25 and 59

    The later of the Effective Date or 12/31/05

     e

    Updates

    The later of the Effective Date or 12/31/05

    7.9

    Physicians Advisory Committee

    Effective Date

    7.10

    New Dispute Resolution Process for Physician Billing Disputes

    Effective Date

    7.11

    Medical Necessity/Experimental-Investigational Determinations

    Effective Date

    7.12

    ERA/EFT

    12/31/05

    7.13

    Participation in Company's Network

     

     a

    Credentialing

    Effective Date + 90 days

     b

    "All Products" Clauses

    7/9/05

     c

    Termination Without Cause

    7/9/05

     d

    Rights of Class Members to Refuse to Accept New Patients

    Effective Date

    7.14

    Fee Schedule Changes

     

     a

    Notice

    Effective Date

     b

    Payment Rules for Injectibles, DME, etc.

    Effective Date

     c

    Appeals of R&C Determinations

    Effective Date

    7.15

    Recognition of Assignments of Benefits

    9/7/05

    7.16

    Application of Clinical Judgment

     

     a(1)

    Medical Necessity Definition

    7/9/05

     a(2)

    External Review Statistics

    Effective Date

     b

    Policy Issues Involving Clinical Judgment

    7/9/05

     c

    Consideration of Administrative Exemption Program

    Effective Date

    7.17

    Billing and Payment

     

     a

    Timing of Claim Submissions 120-day requirement

    12/31/05

     b

    Claims Submissions (acceptance of certain forms and submissions of Clinical Information)

    12/31/05

    7.18

    Timelines for Processing and Payment of Complete Claims

     

     a

    Logging of Receipt Date and Attempt to Require 24-Hour Transmission by Clearinghouses

    The later of the Effective Date + 6 months or 10/1/06

     b

    Payment of Simple Interest

    The later of the Effective Date + 6 months or 10/1/06

    7.19

    No Automatic Downcoding of Evaluation and Management Claims

    5/10/05

    7.20.a.i

    Modifications to Payment Policies

    The later of the Effective Date + 6 months or 10/1/06

    7.21

    Modification of Language in EOBs and Remittance Forms

    Effective Date + 120 days

    7.22

    Overpayment Recovery Procedures

    Effective Date + 90 days

    7.23

    Efforts to Improve Accuracy of Eligibility Information

    5/10/05

    7.24

    Response to Physicians Inquiries

    5/10/05

    7.25

    Confirmation of Medical Necessity

    7/9/05

    7.26

    Electronic Connectivity

    Effective Date + 90 days

    7.27

    Physician Information on Website

    Effective Date + 90 days

    7.28

    Capitation and Physician Organization Issues

     

     a

    Capitation Reporting

    Effective Date

     b

    PCP Assignment

    Effective Date

    7.29

    Miscellaneous

     

     a

    No "Gag Clauses"

    7/9/05

     b

    Ownership of Medical Records

    7/9/05

     c

    Arbitration Fee Limits

    Effective Date + 60 days

     d

    Impact on Physician Agreements

    Obligations and commitments to be incorporated into physician contracts (where required) as they commence pursuant to this Exhibit A

     e

    Impact of this Agreement on Covered Services

    5/10/05

     f

    Privacy of Records

    5/10/05

     g

    Physician Risk Pools

    5/10/05

     h

    "Stop Loss"

    5/10/05

     i

    Pharmacy Provisions-Disclosures re: Formulary; Maintenance of Exception Process; Coverage for Off-Label Uses

    5/10/05

     j

    Restrictive Endorsements

    5/10/05

     k

    Scope of Responsibilities

    Obligations and commitments to be incorporated into physician contracts (where required) as they commence pursuant to this Exhibit A

     l

    Provision of Contract Copies

    7/9/05

     m

    State and Federal Laws

    5/10/05

     n

    Modification of Means of Disclosure

    5/10/05

     o

    Participating Physicians Status and Limits on Obligations on Non-Participating Physicians

    Effective Date

     p

    Limitation on Rental Networks

    Effective Date + 60 days

     q

    Most Favored Nations Clauses

    7/9/05

    7.30

    Compliance with Applicable law and Government Contracts

    Obligations and commitments to be incorporated into physician contracts (where required) as they commence pursuant to this Exhibit A

    7.31

    Value of Section 7 Initiatives

    5/10/05

    7.32

    Force Majeure

    5/10/05

    7.33

    Mental Health Provisions

    Effective Date + 120 days

     

    Note: Company may at its option give noticed to Class Counsel that it is implementing a commitment earlier than the date for such commitment on this Exhibit A, in which case the Implementation Date, Effective Period and Conclusion Date for such commitment(s) shall be advanced in accordance with the date set forth in such notice.


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