California Insurance Commissioner Steven Poizner and the Director of the California Department of Managed Care (DMHC), Cindy Ehnes, announced that they are seeking $1.3 billion for over 130,000 alleged claim violations made by PacifiCare. It is the first action ever taken by both departments against a single health care provider.

Details of the violations

The Department of Insurance conducted market examinations that reviewed PacifiCare files between July 1, 2005 and May 31, 2007. It identified over 130,000 violations – each subject to penalties of $5,000 for non-willful violations and up to $10,000 for willful violations. When you add those numbers up, PacifiCare faces fines of between $650,000 to a staggering $1.3 billion (and this is not a typo – that’s billion, with a ‘B’.) The examinations were conducted in response to hundreds of complaints received from both consumers and providers.

The alleged violations include:

• Wrongful denials of covered claims
• Incorrect payment of claims
• Lost documents including certificates of creditable coverage and medical records
• Failure to timely acknowledge receipt of claims
• Multiple requests for documentation that was previously provided
• Failure to address all issues and respond timely to member appeals and provider disputes
• Failure to manage provider network contracts and resolve provider disputes

Other violations / recoveries

According to a joint press release, the DMHC has already assessed the company, which was acquired by United Healthcare in 2005, a $3.5 million penalty for its practices – the largest fine it has ever imposed. The Department of Insurance also directed a self-audit of the company for unfairly denying coverage for pre-existing conditions. That audit resulted in over $750,000 in claims recoveries.

Putting an end to unfair claims practices

According to Poizner, this joint effort is meant to put an end to unfair claims practices in California. In a press release, he said:

Paying claims is the heart of the insurance business model and the most fundamental job insurers must perform. After years of broken promises to California regulators, it became crystal clear that PacifiCare simply could not or would not fix the meltdown in its claims paying process. We’re going to put an end to that. If PacifiCare can’t understand the ABC’s of basic claims payment, maybe it will understand the dollars and cents of regulatory action.

To view the press release, go to: http://www.dmhc.ca.gov/library/reports/news/prpchbcp.pdf.