Poizner Blocks PacifiCare From Paying Dividend, Cites Possible Penalties
On Monday, Insurance Commissioner Steve Poizner (R) issued an order preventing PacifiCare Life & Health Insurance from paying a $120 million dividend to its parent company because the insurer might need to pay penalties in an ongoing case, the Sacramento Business Journal reports.
Last week, PacifiCare gave notice that it intends to pay the dividend on Dec. 24 to PacifiCare Health Plan Administrators and PacifiCare Health Systems, two subsidiaries of its parent company UnitedHealth Group.
Poizner blocked PacifiCare from making the payments because he said the insurer might be liable for penalties related to the mishandling of health insurance claims.
After UnitedHealth Group purchased PacifiCare in 2005, the Department of Insurance receivedÂ numerous complaints about claims issues.
The department investigated the complaints and charged PacifiCare with more than 130,000 violations. The insurer called for a hearing on the charges, which began in December 2009.
As the case progressed, DOI identified additional problems with PacifiCare and now is charging the insurer with nearly one million violations.
In the legal order, PoiznerÂ saidÂ DOI will prove that PacifiCare has committed at least 992,936 violations of state law or regulations. In addition, Poizner said the insurer "faces a potential civil liability well in excess of its entire surplus" (Robertson, Sacramento Business Journal, 12/13).
As of Sept. 30, PacifiCare had a statutory surplus of $773 million, which it planned to use to pay the dividend to its parent company.
However, DOI said the penalties in the ongoing case could deplete the insurer's surplus because each violation carries a fine of up to $10,000.
UnitedHealth Group has said that the majority of claims errors were administrative issues that did not harm members.
Tyler Mason, UnitedHealth Group spokesperson, said the parent company disagreed with Poizner's decision to block the dividend payment, adding that "it's inappropriate to use this process to try to gain leverage in a separate case about administrative issues that have long since been addressed" (Yee, Minneapolis Star Tribune, 12/13).
PacifiCare officials noted that the company paid $2 million more than two years ago to settle similar chargesÂ from the Department of Managed Health Care. The insurer said it will continue defending itself against DOI's allegations.
PacifiCare can protest Poizner's order at a San Francisco hearing scheduled for Dec. 21 (Sacramento Business Journal, 12/13).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.