updated 7/11/2005 4:53:11 PM ET 2005-07-11T20:53:11

WellPoint Inc., the nation's biggest publicly traded health insurer, said Monday it will pay up to $198 million to settle two class-action lawsuits brought by representatives of more than 700,000 doctors over alleged unfair payment practices.

As part of the settlement, the Indianapolis-based company said it has agreed to pay $135 million to doctors and contribute $5 million to a nonprofit foundation aimed at improving health care for the disadvantaged. It also said it would pay legal fees of up to $58 million, in an amount to be determined by the court.

The physicians contended they have been systematically cheated by insurance companies that programmed computers to pay for less intensive services than were actually provided.

The settlement will result in a pretax expense of $103 million, which will cut second-quarter earnings by 10 cents per share after taxes. WellPoint, the nation's leading health benefits provider with 28.5 million members, operates mainly under the names Blue Cross and Blue Shield.

If approved by the U.S. District Judge Federico Moreno, the agreement will settle two national lawsuits against WellPoint Health Networks Inc. and Anthem Inc., which merged last year to create the current company.

One suit pitted a nationwide class of physicians against major national managed care companies, while a second lawsuit was brought against the Blue Cross Blue Shield Association and Blue Cross and Blue Shield companies, WellPoint said.

Health Net, Prudential, Aetna and Cigna previously settled with the doctors. UnitedHealth Group, PacifiCare Health Systems, Coventry Health Care and Humana remain as defendants, with the case set for trial in Miami in January.

Moreno has ordered settlement discussions with the defendants, whose spokesmen didn't immediately return calls seeking comment Monday.

"Wellpoint obviously recognized that a costly trial of any of the disputed issues with physicians would not be in the interest of the company," said Archie Lamb, one of the attorneys for the doctors. "This agreement advances a very basic principle: that the physicians' input is a critical part of the health care system."

Larry C. Glasscock, president and chief executive officer of WellPoint, said in a statement that the settlement is "a very important step in further collaborating with physicians." The statement did not acknowledge any wrongdoing by the company.

"This agreement will also help to support more efficient and high quality health care that will enable physicians to spend more time with patients and that ultimately benefits everyone, including our members," said Dr. Sam Nussbaum, WellPoint's executive vice president and chief medical officer.

"While not perfect, this settlement promises unfettered physician-patient communication when it comes to discussing treatment options with their patients," said Dr. John Antalis, president of the Medical Association of Georgia, the first state medical association to sue the managed care industry for improper payment practices. "There is nothing more important than making sure that only patients and their physicians are decision makers when it comes to evaluating medical care options."

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