PacifiCare Pays $87M To Settle FEHBP Overcharges Case

The Justice Department announced on Friday that PacifiCare Health Systems will pay $87.3 million to settle allegations that it overcharged for benefits provided to members of the Federal Employees Health Benefits Program, the AP/New York Times reports. Federal prosecutors had said that PacifiCare inflated claims for insurance payments and charged the government at higher rates than those paid by its commercial customers. The settlement represents the largest of its kind involving government contracts under FEHBP (AP/News York Times, 4/13). PacifiCare, which is still facing a lawsuit filed by the state of Texas alleging that it failed to pay providers, said the settlement "will not be a significant burden" because the company has adequate reserves. The Santa Ana, Calif.-based insurer has been struggling in recent years with medical costs that are rising faster than payments in its Medicare managed care plans. Most of the disputed contracts under FEHBP were with FHP International, which PacifiCare acquired in 1997 (Rundle, Wall Street Journal, 4/15). Concerns over PacifiCare's FEHBP billing practices were reported by Valerie Fletcher, a former PacifiCare employee who sued the company in 1998 under a federal whistleblower law. As a result of the settlement, Fletcher will receive $3.5 million (AP/New York Times, 4/13).