California insurance regulators last week announced that United Healthcare is facing fines in excess of $1.3 billion for widespread payment problems since its takeover of PacifiCare two years ago.

The California Department of Insurance (DOI) and the California Department of Managed Health Care (DMHC) last year launched a joint investigation into the health care giant’s unfair payment practices. This joint endeavor is an historic step in the effort to put an end to the practice of unfair claims handling in the health insurance industry. The investigation was prompted by complaints filed by CMA’s Center for Economic Services on behalf of CMA member physicians.

The DOI alone uncovered 133,000 violations of state laws and regulations regarding payments for medical care. Each violation carries a maximum penalty of $10,000 for a possible total of $1.33 billion. Similar violations were found by DMHC, which issued its own fine of $3.5 million, the largest fine ever imposed by the DMHC. DMHC will also assign a claims monitor to oversee the insurer’s compliance with a corrective action plan. United/PacifiCare’s alleged violations include:

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

“We are encouraged that California’s two regulatory agencies have taken the important step of banding together to tell United/PacifiCare enough is enough,” says CMA President Richard Frankenstein, M.D. “For-profit health plans have made billions of dollars in California by putting profits ahead of patients. Just because United said they’re sorry and will pay fines, it doesn’t mean patients are protected and won’t continue to suffer. These fines won’t give them back their money or their health.”

Since the United PacifiCare merger more than two years ago, there has been great chaos for doctors and patients. The insurance company was not able to keep track of the patients it insured and the doctors with whom it had contracts, creating a bureaucratic nightmare for patients and doctors. United’s poor administrative practices affected thousands of patients who in some cases went without care or lacked continuity of care. Meanwhile, United profits nationwide continued to soar and its top officials collected billions of dollars in salary and other benefits.

CMA publicly opposed the United/PacifiCare merger from the beginning, saying it would be a detriment to patient care, yet United officials have used the merger as an excuse for their inefficiencies and errors.

Doctors throughout the state complained to CMA about problems with United, including patients being told erroneously that they would have to switch doctors, or that their doctors were out of network when they actually were not. Patients were told they had different coverage than they signed up and paid for, and were given extremely outdated lists of network doctors. The mistakes caused delays and denials of patient care. CMA passed the many complaints on to regulators and asked them to investigate the insurance company early last year.

The impact of this investigation may stretch beyond the fines. At a press conference in Burbank last week, California Insurance Commissioner Steve Poizner called for audits into all California’s health insurance companies, and vowed to “come down on them like a ton of bricks” if insurers aren’t paying doctors and hospitals and patients on time. Wall Street reacted to the fines as well: United Health stock dropped as much as 3.6% on Tuesday upon news of the fines, and ended down 2.3 percent.

Contact: Aileen E. Wetzel, 916/551-2037 or awetzel@cmanet.org.