California Commissioner Sued by UnitedHealth Over Fine

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UnitedHealth Group has sued California Insurance Commissioner Dave Jones to block a $173.6 million fine the insurer incurred for violations during a botched acquisition.

The lawsuit was filed in early July in Orange County Superior Court.

Minnesota-based UnitedHealth said Jones was abusing his power and setting a dangerous precedent by seeking such stiff punishment for relatively minor violations.

State insurance regulators said UnitedHealth, the nation’s largest health insurer, committed more than 900,000 violations after the 2005 takeover of Cypress-based PacifiCare. UnitedHealth has acknowledged the acquisition didn’t go as planned. The company acknowledges numerous mistakes in processing medical claims and customer applications.

In its June 9 decision, the insurance department said its proposed fine “appropriately reflects the gravity of PacifiCare’s offenses and provides the necessary deterrent effect going forward.”

Byron Tucker, a spokesman for the insurance department, said the agency hadn’t had time to fully review UnitedHealth’s lawsuit.

Four years ago, California sought a penalty of nearly $10 billion against the insurer – but that record fine didn’t stand. Last year, an administrative law judge rejected much of the state’s case and said UnitedHealth should be fined no more than $11.5 million.

Last month, Jones rejected that ruling in a 220-page decision and imposed the $173.6-million penalty. He ordered UnitedHealth to pay it by July 22.

Stephen Scheneman, president of UnitedHealth’s PacifiCare unit, said the outsized fine “threatens to paralyze the health care system in the state, resulting in more costs and bureaucracy for Californians.”