PacifiCare fined record $3.5 million

In an era when comedians regularly lampoon the delays and red tape encountered in managed health care, patients might think that no one is listening. But regulators showed Tuesday that a pattern of complaints will get their attention.

After an unprecedented eight-month joint state probe triggered by hundreds of complaints, state health insurance regulators Tuesday slapped the PacifiCare unit of UnitedHealthcare with a record $3.5 million fine.

Regulators also will ask an administrative law judge to uphold its allegations that the company mishandled claims and levy additional penalties of up to $1.3 billion. The state accused PacifiCare of 133,000 violations from 2005 to 2007.

"This is off the scales in terms of severity. We rarely see so many complaints," said state Insurance Commissioner Steve Poizner. "I simply will not tolerate shoddy claims practices."

To ensure similar problems don't crop up at other companies, Poizner has ordered an audit of the state's major health plans, including Aetna, Blue Shield, Cigna, HealthNet and WellPoint.

In the PacifiCare case, state regulators heard from patients fed up with the Southern California-based health plan for losing their insurance claims and doctors frustrated about fouled-up payments and contracts.

"No one seemed to communicate with us," said Raeanna Jackson, who handles billing for Dr. Robert Watson III, a Modesto pediatrician. "I almost had to call every day. It took seven or eight months to finally get reimbursed."

UnitedHealthcare officials are still in discussion with the state about the amount of the fine and contend that most problems didn't directly affect consumers.

Regulators and the physician groups disagreed, citing these problems:

• A Sacramento-area surgeon couldn't schedule surgeries for more than six months because the insurer was slow to enter his contract in its computer system.

• More than 200 of Watson's patients incorrectly received letters indicating that he was no longer in the insurer's network of physicians. Watson lost about 25 percent of these patients but continued to see others without getting paid for about eight months.

• A consumer spent 11 months trying to get claims paid for his family, including an autistic child. His wife postponed EKG stress tests, fearing the family could be forced to pay for the procedures. Regulators contend PacifiCare never specified what information was needed to reconsider the denied claims.

So far, regulators have helped doctors and patients collect more than $1 million in payments from PacifiCare's preferred provider organization and health maintenance organization plans.

Cindy Ehnes, director of the Department of Managed Health Care, said PacifiCare stood out because of a spike of complaints that started to emerge shortly after the company's $9.2 billion merger with United Health Group Inc. in late 2005, a deal that created a vast network of HMO and PPO plans covering more than 3 million Californians.

"They were getting it wrong pretty consistently," Ehnes said.

The joint DMHC and Insurance Department investigation covered about 60,000 members in PacifiCare's HMO plans and 130,000 with PPO coverage. In their review, investigators conducted a computer analysis of 1.1 million paid claims from June 2006 to May 2007. The review found 30 percent of the HMO claims were wrongly denied and 29 percent of the disputes with doctors were handled incorrectly.

During that time, the state received 237 consumer and 68 physician complaints against PacifiCare. The California Medical Association recorded more than 310 complaints from its doctors in 2006 and 2007.

UnitedHealthcare officials acknowledged that merging the two companies proved problematic and led to many of the administrative issues involving physician contracts and payments and consumer co-payments and coverage. It has hired 50 additional full-time claims processing and data entry employees and retrained its claims examiners.

"We recognize that the pace of the transition may have resulted in some physicians and other care providers experiencing inconsistent service in the past," David Hansen, chief executive of UnitedHealthcare's Pacific region, said in a statement. He said the health plan has addressed the issues raised by regulators and moved "to improve operational performance and service in California."

About the writer:

• Call The Bee's Gilbert Chan, (916) 321-1045.