The Wall Street Journal-20080130-UnitedHealth Is to Be Fined --36-3-5 Million- California Probe May Lead Regulators To Seek More Penalties

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UnitedHealth Is to Be Fined $3.5 Million; California Probe May Lead Regulators To Seek More Penalties

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California regulators said they would fine UnitedHealth Group Inc. $3.5 million and seek millions of additional dollars in penalties for widespread claims-paying problems stemming from the insurer's 2005 acquisition of PacifiCare Health Systems Inc.

In a probe prompted by hundreds of complaints from physicians and consumers, state insurance regulators said the health-insurance giant's PacifiCare unit committed more than 130,000 alleged violations over a 12-month span during 2006 and 2007 due to repeated glitches in meshing the two insurers' operations. They include wrongfully denying claims, paying them late or not in full, and giving patients erroneous information about co-payments and whether their doctors were in the health plan's networks.

California's Department of Managed Care is levying the $3.5 million fine.

The state's insurance commissioner, Steve Poizner, said his department would also seek penalties with maximums ranging between $5,000 and $10,000 per violation. Those fines could theoretically add up to between $650 million and $1.3 billion if the commissioner gets his way, though several analysts said additional fines would likely be far lower given the amounts traditionally levied in California. The allegations must first be heard by a California administrative law judge.

UnitedHealth characterized the problems as largely administrative and affecting physicians more than patients, but executives acknowledged that the insurer had miscalculated how much time a smooth transition would take. It said a large number of the problems occurred in a small sliver of PacifiCare plans that cover 190,000 out of a total 2.1 million PacifiCare members in California.

"We have already taken and continue to take aggressive steps to address the issues raised by the departments and to improve our operational performance in California," said David Hansen, chief executive of UnitedHealth's Pacific region. The company added that it has added 50 full-time staff to address claims processing and data entry problems and to resolve disputes and created a new senior position to oversee its efforts to fix its California problems.

Mr. Poizner, however, voiced frustration with UnitedHealth's efforts so far. "This is off the charts in terms of the number of violations you see from an insurer," he said.

PacifiCare, for instance, mistakenly told patients of Modesto, Calif., pediatrician Robert Watson that the practice was no longer in its network, prompting dozens to fear they had to find another doctor. The practice's medical biller, Raeanna Jackson, says the health plan eventually resolved the problem and repaid the practice $30,000 in underpayments resulting from the glitch after several months of phone calls. "That was after a lot of pressuring," she says.

A UnitedHealth spokesman said the company had been working to resolve those sorts of issues.