Managed Care Report

• A New York insurance broker has sued Oxford Health Plans (Norwalk, CT), alleging that the company has sought to charge some customers rates that were much higher than allowed by state law as part of its effort to recover from a financial debacle in FY97 and FY98. In the suit, the broker also charged that the company offered to rebate a substantial portion of a premium to one of its large accounts to reach an agreement on a rate, reported Dow Jones Business News. In addition, the suit charges that Oxford canceled its contract with the broker in retaliation for the broker’s contesting the high premiums on behalf of its clients and complaining to state insurance regulators that Oxford was engaging in unlawful practices. The broker is seeking $20 million in compensatory damages, Dow Jones reported. Oxford said in a statement that it "intends to vigorously defend this lawsuit and our decision to terminate (the broker)." Oxford said it stands behind its premium pricing and said "the allegations in the complaint are without merit."

• Blue Cross of California (Thousand Oaks, CA), the California subsidiary of WellPoint Health Networks, was recently named Blue Ribbon HMO by the Pacific Group on Health (San Francisco). The Blue Ribbon Award recognizes leadership and excellence among California’s health plans. Key criteria include quality, value, data capabilities, and a demonstrated commitment to collaborative projects with purchasers and providers.

• Aetna (Hartford, CT), the parent company of Aetna U.S. Healthcare (Blue Bell, PA), said its board has adopted a new shareholder rights plan that will strengthen the board’s ability to respond to hostile takeovers and maximize shareholder value as such takeover attempts surface. But Aetna said the action is not in response to any known effort to acquire control of the company. The new rights plan will replace the existing, 10-year-old rights plan set to expire Nov. 8 and includes two new provisions. First, it will remove a provision that allowed the board to reduce the triggering ownership level to 10%. Instead it will provide for the automatic distribution of one right for each share of Aetna stock to shareholders of record as of Nov. 8. Second, the new plan will provide for independent directors to review the rights plan at least once every three years and recommend if it should be continued or amended. In other news, Aetna’s stock fell last week, according to the Wall Street Journal, as healthcare analysts grew concerned that the company’s Prudential HealthCare unit is losing more money than expected and that a recovery might be far in the future. Aetna said Prudential, which it acquired in August for $1 billion, is losing money at an annual rate of $200 million – twice as much as expected, the Journal reported.

• Beyond Benefits (Long Beach, CA) will purchase HealthStar (Chicago), a PPO, from HealthStar Corp. (Scottsdale, AZ). HealthStar has 2,086 hospitals and 139,624 primary care physicians and specialists under contract in 39 states.

• Humana (Louisville, KY) has entered into a partnership with Physicians Group Services (Jacksonville, FL) to operate eight north Florida medical centers formerly operated by FPA Medical Management. The agreement was effective Sept. 1. Humana assumed operation responsibility for 50 former FPA centers on June 1 as part of an agreement with FPA, approved by the federal bankruptcy court overseeing FPA’s Chapter 11 reorganization, said Humana. Since then, as a result of the new agreement and similar transactions over the past several weeks, Humana no longer operates 29 of the 50 centers. Humana plans to transfer operation of all the former FPA centers to other provider groups to focus exclusively on health insurance.