N.C. Insurance Department Fines UnitedHealthcare Companies Nearly $800,000

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July 28, 2008 Monday 02:06 PM EST

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N.C. Insurance Department Fines UnitedHealthcare Companies Nearly $800,000

Fran Lysiak

GREENSBORO, N.C.

UnitedHealthcare Insurance Co. and UnitedHealthcare of North Carolina Inc. have agreed to pay a fine of nearly $800,000 as part of a settlement with the state Department of Insurance to resolve allegations they violated state law concerning how they processed and paid claims and handled customers' complaints and other issues.

In September 2007, UnitedHealthcare, a unit of UnitedHealth Group (NYSE: UNH), reached an agreement with 36 states and the District of Columbia over claims-processing problems. Under that accord, the company was to pay at least $12 million to the 37 jurisdictions to settle all matters and to reimburse them for the costs associated with the multistate analysis of the company's commercial health plans (BestWire, Sept. 7, 2007).

However, the North Carolina insurance department said it didn't participate in the multistate settlement, citing concerns over restrictions placed on its future regulatory examinations. The department, headed by Commissioner Jim Long, said its settlement includes most of the major provisions from the multistate agreement, but gives it the flexibility to address future issues as they arise.

Problems with the UnitedHealthcare companies' claims-payment practices, the North Carolina regulator said, were first revealed in 2003 and 2004, when it was receiving complaints from consumers and health care providers. At that time, it identified many problems with their claims-handling processes and fined both companies as part of a settlement in 2004.

In a statement, UnitedHealthcare said that under the agreement, UnitedHealthcare in North Carolina "commits to meeting the same, uniform standards of performance" in settling claims, resolving appeals and responding to complaints received through the North Carolina insurance department as those laid down in the 2007 multistate agreement.

In the 2007 multistate settlement, regulators in the states involved worked with the National Association of Insurance Commissioners. The deal covered 26 UnitedHealthcare affiliated insurers and health maintenance organizations. The alleged problems with its claims practices involved coordination of benefits, appeals and grievances, explanations of benefits and utilization review. Among the problems cited were a failure to apply correct fee schedules and deductibles and failure to pay claims promptly (BestWire, Sept. 7, 2007).

The agreement included a potential for payments of $20 million and a three-year improvement plan for United in effect through Dec. 31, 2010, according to Eric Dinallo, superintendent of the New York State Insurance Department. The plan established benchmarks for claims accuracy, timeliness, appeals review and consumer complaint handling (BestWire, Sept. 7, 2007).

Meanwhile, the North Carolina insurance department said the penalty from the UnitedHealthcare companies, at $786,655, will be distributed to the state public school system, as required by state law.

UnitedHealthcare of North Carolina currently has a Best's Financial Strength Rating of A (Excellent).

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])

July 29, 2008