State Regulators Seeking Up to $9.9B in Fines From PacifiCare

The California Department of Insurance is pursuing up to $9.9 billion in fines from PacifiCare over allegations that the health insurer violated state law nearly one million times between 2006 and 2008, the Los Angeles Times reports.

Cypress-based PacifiCare has more than one million policyholders statewide.

Details of Allegations

After UnitedHealth Group acquired PacifiCare in 2005, the state claims that the insurance firm:

• Did not effectively maintain operations for 130,000 policyholders;
• Failed to pay physicians what they were owed;
• Lost patient records;
• Mismanaged medical claims; and
• Neglected to address problems.

Determining Penalties

In 2008, California regulators investigated PacifiCare and said they identified 133,000 potential violations of state law with maximum penalties of $1.33 billion. After more details emerged in the case, the total number of possible violations grew to 992,936.

For each of PacifiCare's alleged violations, the state is seeking fines of up to $10,000.

The fines being sought from PacifiCare appear to be the largest of their kind, according to the National Association of Insurance Commissioners.

PacifiCare Response

UnitedHealth Group and PacifiCare are fighting the fines and accusations in a legal hearing that started in Oakland 10 months ago. The firms claim the state's allegations generally relate to administrative mistakes that did not lead to harm.

According to the insurers, three-quarters of the issues stem from a period in 2007 during which PacifiCare failed to provide sufficient information to patients and physicians about their right to appeal coverage decisions.

PacifiCare spokesperson Cheryl Randolph said, "The allegations concerning claims processing by PacifiCare are simply not true," adding, "By all objective measures, PacifiCare pays its claims timely and accurately."

Next Steps

The legal hearing might conclude as early as next month, at which point an administrative law judge would determine whether to recommend penalties.

Ultimately, the state's insurance commissioner will decide whether to accept, reject or revise the judge's recommendations. The insurance commissioner's decision potentially could be appealed to the California Superior Court (Helfand, Los Angeles Times, 9/7).