The California Department of Insurance (DOI) Commissioner Dave Jones has issued an historic decision to impose penalties against United Healthcare of more than $173 million dollars for 900,000 violations of the insurance code from 2005 to 2008. This is the largest administrative penalty ever assessed against a California health insurer or plan.

The administrative proceeding arises from problems that surfaced after United Healthcare’s acquisition of PacifiCare in 2005, which had been heavily scrutinized by regulators. Shortly after the transaction, the California Medical Association (CMA) saw a spike in complaints from CMA members about the way PacifiCare was processing claims and contracts. Despite CMA’s efforts to work with PacifiCare, the problems were not resolved, but rather became widespread and pervasive. CMA forwarded dozens of provider complaints to the DOI and requested the insurance regulator investigate. After conducting its own market conduct investigation, the DOI filed an administrative proceeding against United Healthcare, charging PacifiCare with violations that included: (1) failing to give providers notice of their appeal rights and members notice of their right to an independent medical review; (2) failing to timely pay or correctly pay claims as well as interest on late-paid claims; (3) failing to acknowledge receipt of claims; (4) failing to timely respond to provider disputes; (5) illegally closing claims files; and (6) sending untimely collection notices for overpayment. 

PacifiCare dragged CMA into the protracted administrative trial that lasted more than four years. CMA was served with burdensome requests for documents and information, and CMA staff members and physician members testified extensively in the trial. In a 220-page decision issued in June, Commissioner Jones sustained the findings of the administrative judge that PacifiCare did indeed commit over than 900,000 violations of the law. Jones concluded that a fine of $173.6 million is warranted because “[n]o other insurer has violated [the insurance laws] hundreds of thousands of times. And no other insurer has repeatedly misrepresented its business practices, failed to correct the root causes of its violations, or ignored its statutory obligations to the extent” found in the case.

United Healthcare has appealed Jones’ decision to a California superior court. CMA will continue to stay involved as necessary to ensure that United Healthcare is held to account for the vast problems it caused to CMA members and physicians throughout California.