A Clean Bill of Health in 2009

• Email
• Share
• Print

Looks as though UnitedHealth Group's (NYSE: UNH) New Year's resolution was to tie up loose ends in the Legal Matters section of its 10-K.

On Tuesday, the company settled with the New York Attorney General, agreeing to pay $50 million to set up an independent database of customary charges for doctors. UnitedHealth had been using its own database, and even selling the data to other insurers. The database is used to determine what the appropriate reimbursement for doctors should be; something the Attorney General thought was a conflict of interest.

Then today, UnitedHealth said it'll also pay $350 million to settle another lawsuit over the same database issue. This one was brought by the American Medical Association and plan members, among others. The suit claimed that UnitedHealth had shortchanged doctors by underpaying them for their services, then requiring members to pick up the tab.

Seeing the writing on the wall, Aetna (NYSE: AET), which used UnitedHealth's database, said today that it'll contribute $20 million to the independent database. No word yet from Cigna (NYSE: CI) or WellPoint (NYSE: WLP), which the Attorney General was also investigating.

The Attorney General's office has been doing pretty well knocking down health-care companies lately. Last summer, it got pharmacy benefits manager Express Scripts (Nasdaq: ESRX) and Cigna to agree to a $27 million settlement over inflating the cost of generic drugs.

No one wants to have companies they own sued by the government, and sometimes it seems that these settlements are just an added tax on the companies. As long as the company isn't doing something bad enough to get its headquarters raided, the way WellCare Health Plans (NYSE: WCG) did, I think it's probably best to give the companies a pass and move on.

This newest settlements over the database aren't likely to have a huge effect on the bottom line. The companies should be able to pass any additional costs along to the paying customers in the form of higher premiums. UnitedHealth will miss out on some earnings from having the proprietary database, but that should be minor. Earnings from the division that runs the database were less than 4% of operating earnings during the first nine months of last year, and the division does other consulting besides the database.

The bigger problem for health insurers comes from the man about to be sworn into office next week. With a cloud of uncertainty hanging over their heads about what a national health-care system will look like, these companies' share prices are likely to be hampered until things come more into focus.

Ensure that you're up to speed with this Foolishness:

• Your best chance to profit in 2009 will come from large-cap value.
• Check out the 10 hottest stocks of 2008.
• Keanu Reeves calls market bottom.