TRUMBULL, Conn., March 3 /PRNewswire-FirstCall/ -- Oxford Health Plans,
Inc. (NYSE: OHP) announced today that it has agreed in principle with the
plaintiffs to settle the 1997 securities class action litigation pending
against the Company for $225 million. The settlement is subject to the
execution of documents for filing with the Court and approval by the Court
after notice to the class.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001212/OXHPLOGO )
The excess insurance carriers for the first $25 million under the
Company's previously disclosed $200 million excess insurance policies have
agreed to contribute $25 million to the settlement, but the other carriers
under the policies have refused to contribute to this settlement.
Accordingly, the Company will be required to pay $200 million of the
settlement and, as previously disclosed, will be required to pay the excess
insurance carriers an additional premium of $8 million. The Company will fund
the settlement (including the additional premium and litigation expenses) with
cash and financing.
"We are pleased to put this matter behind us and focus entirely on the
future of Oxford. We do not believe that funding of this settlement will have
a significant effect on our existing share repurchase program during the
remainder of 2003," said Charles G. Berg, president and chief executive
officer.
The Company previously incurred a charge of $151.3 million, representing
its previous $161.3 million settlement offer net of $10 million in primary
directors and officers insurance coverage, and a $20 million charge for
additional legal expenses related to trial. In connection with the settlement
announced today, the Company expects to incur an additional pre-tax charge of
between $40 and $45 million in the first quarter of 2003, which charge, along
with prior charges, will fully cover all of the Company's expenses relating to
settlement costs, legal fees expenses.
As previously disclosed, the Company had offered $161.3 million to the
plaintiffs representing the full amount of the retention under the insurance
carriers' interpretation of the excess insurance policies. Under the
insurance carriers' interpretation of the excess insurance policies, the
Company was obligated to pay the $161.3 million retention and the additional
$8 million premium, and, if the excess insurance carriers fully participated
in the $225 million settlement, the Company would have been obligated to pay
approximately $6.4 million in co-insurance. Accordingly, the Company's
settlement without the full benefit of the excess insurance coverage will
result in the Company paying an additional approximately $32.3 million.
The Company is considering its options with respect to the excess
insurance carriers that refused to contribute to the settlement, including the
possibility of bringing legal action against these carriers for recovery of at
least $32.3 million under the terms of the excess insurance policies.
These securities class actions, which were brought in 1997 following the
October 27, 1997 decline in the price of the Company's common stock, are
described in more detail in the Company's annual report on Form 10-K for the
year ended December 31, 2002.
Founded in 1984, Oxford Health Plans, Inc. provides health plans to
employers and individuals primarily in New York, New Jersey and Connecticut,
through its direct sales force, independent insurance agents and brokers.
Oxford's services include traditional health maintenance organizations, point-
of-service plans, Medicare plans and third party administration of
employer-funded benefit plans.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements concerning
the 1997 securities litigation, options with regard to the excess insurance
carriers, the Company's share repurchase program and other statements
contained herein regarding matters that are not historical facts, are forward-
looking statements as defined in the Securities Exchange Act of 1934; and
because such statements involve risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to:
* Changes in Federal or State regulation relating to health care and
health benefit plans, including proposed patient protection legislation
and mandated benefits.
* The state of the economy.
* Rising medical costs or higher utilization of medical services,
including higher out-of-network utilization under point-of-service
plans and new drugs and technologies.
* Competitive pressure on the pricing of the Company's products,
including acceptance of premium rate increases by the Company's
commercial groups.
* Higher than expected administrative costs in operating the Company's
business and the cost and impact on service of changing technologies.
* The ability of the Company to maintain risk transfer, risk sharing,
incentive and other provider arrangements and the resolution of
existing and future disputes over the reconciliation's and performance
under such arrangements.
* Any changes in the Company's estimates of its medical costs and
expected cost trends.
* The impact of future developments in various litigation (including
pending class and derivative actions filed against the Company and
certain of its officers and directors, and other proceedings commenced
against the Company and several employees by certain healthcare
providers), class actions in Connecticut, New Jersey and New York and
related litigation by the Connecticut Attorney General, regulatory
proceedings and other governmental action (including the periodic
examination, investigation and review of the Company by various Federal
and State authorities).
* The Company's ability to renew existing members and attract new
members.
* The Company's ability to develop processes and systems to support its
operations and any future growth and administer new health care benefit
designs.
* Any future acts or threats of terrorism or war.
* Those factors included in the discussion under the caption "Cautionary
Statement Regarding Forward-Looking Statements" in Part I, Item 1, of
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002.
SOURCE Oxford Health Plans, Inc.
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Related links:
http://www.oxfordhealth.com
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Company News On-Call:
http://www.prnewswire.com/comp/104612.html
CONTACT:
Investors, Gary Frazier, +1-203-459-7331, or
Deborah Abraham, +1-203-459-6674, or Media, Maria Gordon Shydlo,
+1-203-459-7674, all of Oxford Health Plans
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