UnitedHealth faces stiff fines in California

State regulators have issued a $3.5 million fine against the company over claims payment and other violations -- and the penalties could get significantly larger.

By Emily Berry, AMNews staff. Feb. 18, 2008.

At the end of 2007, UnitedHealth Group executives vowed to improve their operations and physician relations after saying the company lost 315,000 commercial members, mostly because it mishandled the 2005 acquisition of PacifiCare.

In late January, California insurance regulators offered their own numbers to measure how badly they believed United mishandled the PacifiCare deal.

One number was a fine of $3.5 million by the California Dept. of Managed Health Care, over mishandling claims, the largest penalty that department has ever issued.

Another number -- $1.3 billion -- is the maximum fine the California Dept. of Insurance could levy on the health plan. While analysts consider that amount unlikely, United still could face a hefty fine depending on how many of its apparent violations of state laws and regulations on paying medical claims are deemed "willful." Each "willful" violation is a maximum $10,000 fine, and each not considered intentional is a maximum $5,000.

Even if all are considered non-willful, then United could face as much as a $650 million fine -- about 50 times greater than any penalty the department has ever imposed, and a similar proportion greater than the $12 million paid last October in a 36-state settlement over payment practices.

That's because of one more number: 133,000. That is how many violations the insurance department said it uncovered, representing a period between June 23, 2006 and May 31, 2007. Meanwhile, the managed care department said 30% of the medical claims it reviewed were improperly denied. The insurance department regulates PPOs, while the managed care department regulates HMOs, and they conducted a joint, eight-month investigation into PacifiCare.