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January 31, 2008

Health Care Marketplace | California Regulators Issue $3.5M Fine

California health insurance regulators on Tuesday issued a $3.5 million fine against PacifiCare, a subsidiary of UnitedHealth Group.

The state Department of Managed Health Care issued the fine after a joint investigation with the state Department of Insurance found PacifiCare from July 1, 2005, through May 31, 2007, had more than 130,000 alleged claims processing violations. State regulators said that PacifiCare improperly denied 30% of claims reviewed during the investigation. In addition, they said that PacifiCare often delayed reimbursements to physicians and hospitals for more than 30 days.

Complaints against PacifiCare increased significantly in early 2006, when UnitedHealth acquired the company. The $9.2 billion acquisition increased UnitedHealth membership by about three million to 27 million. David Hansen, regional chief executive for UnitedHealth, on Monday in a meeting with the Los Angeles Times said that the company should have made fewer changes to PacifiCare at the time of the acquisition.

PacifiCare spokesperson Tyler Mason said that the company has taken "aggressive steps" to address the problems cited by state regulators. He added that PacifiCare has added 50 full-time employees to address claims processing issues. PacifiCare officials have not decided whether the company will pay the $3.5 million fine or pursue an appeal, Mason said.

State Might Issue $1.3B in Additional Fines
California Insurance Commissioner Steve Poizner on Tuesday said that the California insurance department might issue additional fines against PacifiCare for the alleged claims processing violations. Poizner said that fines for each alleged violation would range from $5,000 to $10,000.

According to the Wall Street Journal, additional fines could "theoretically add up to between $650 million and $1.3 billion," but "several analysts said additional fines would likely be far lower given the amounts traditionally levied in California." The state will issue the maximum fine only in the event that "authorities prove all the violations and show they were committed as part of a deliberate scheme."

More Audits
Poizner on Tuesday also said that the California insurance department will begin audits of the eight largest health insurers in the state to address alleged claims processing violations similar to those found at PacifiCare, the Union-Tribune reports. The eight health insurers include Aetna, Blue Shield of California, Cigna, HealthNet and WellPoint, among others. Representatives from WellPoint, which operates Blue Cross of California, and Blue Shield declined to comment on the audits.

Poizner said, "The actions today get at the very core of how our health care system operates. When a consumer gets sick, they expect their health insurance company to be there for them to pay legitimate claims to doctors and hospitals." He added, "I want to send a clear message to every health insurance company in California that I won't tolerate any company deploying a shoddy claims filing system"

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Posted by healthinsurance at January 31, 2008 08:19 AM