Pacificare HMO Hit with Big Fine

More of this please. California regulators have hit Pacificare with a huge fine. From the story:

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...

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.

HMOs are problematic because they earn profits by cutting costs, which can mean cutting levels of care. Tough regulation, along with resort to private civil litigation, are necessary checks and balances to the potential for abuse of power by bean counting executives.