The Hawaii Medical Service Association could pay millions to local physicians as part of a $128 million settlement of a class-action lawsuit against Blue Cross and Blue Shield Association plans that was filed in Miami.

HMSA, the largest Hawai'i medical insurer, said its portion of the settlement is still being calculated, but at one time estimated its share will be about 2 percent of the total. Legal costs of $49 million also are being shared by the 23 Blue Cross and Blue Shield plans and the Blue Cross and Blue Shield Association.

The settlement stems from a May 2003 lawsuit in which physicians alleged they were underpaid on insurance claims. The doctors accused the plans of making profit-driven decisions on patient care and creating excessive paperwork for filing claims, slowing down the process. The settlement still needs approval by a federal judge.

The Blue Cross plans denied the allegations in settling the lawsuit, but said the settling of the case will strengthen their relationships with physicians and benefit members. The agreement requires Blue Cross plans to revise claims-payment procedures and set up independent review boards to decide billing disputes.

Plaintiffs in the lawsuit included the Hawaii Medical Association, which represents 1,300 physicians in the state.

"We think it's going to be a great improvement for physicians and their patients because more physician time will be put into treatment rather than paperwork," said Paula Arcena, Hawaii Medical Association executive director.

"It's absolutely good news."

She said the group and several physicians still have a similar lawsuit in state Circuit Court that alleges HMSA has unfair business practices. It was filed in 2003.

HMSA spokesman Cliff Cisco said the insurer had already set aside reserves to handle a potential claim stemming from the settlement. He said members' premiums won't change as a result of the agreement.

"We think this is in the best interest of our members to bring this case to a close," Cisco said.

Advertiser news services also contributed to this report.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.