UnitedHealth Units Face $2.4 Million Fine in Georgia Over Alleged Prompt-Pay Violations - 10/14/05

Article from BestWire Online

ATLANTA October 14 (BestWire) - United HealthCare Insurance Co. and its sister company United HealthCare of Georgia Inc. are facing a proposed $2.4 million fine from Georgia's insurance commissioner for allegedly failing to pay health-care providers' claims on a timely basis.

Insurance Commissioner John W. Oxendine has scheduled a show-cause hearing for the United HealthCare companies, which are units of Minneapolis-based UnitedHealth Group Inc. (NYSE:UNH), in which the companies will be given the opportunity to explain why they shouldn't have to pay the combined fine of

$2.4 million, according to Oxendine's office.

At issue are allegations that the United HealthCare companies, since 2001, failed to pay between 75,000 and 80,000 claims in accordance with Georgia's prompt-pay law, which states that insurers must pay doctors' and hospitals'

claims within 15 working days or notify them of the reason for the delay.

The state law also calls for 18% interest on claims that aren't paid within the 15-day period, a spokesman for Oxendine said.

The fine against the United HealthCare companies would be the highest ever against a health insurer that does business in Georgia for violations of the state's prompt-payment law, Oxendine said.

Roger Rollman, a spokesman for United HealthCare's Southeast region, said the company "strongly disputes" the commissioner's findings and the proposed fine. "We don't understand where it is coming from, " he said, adding that Oxendine's actions in the matter are "bizarre."

Since 2001, United HealthCare has processed 4.3 million claims, of which more than 98% were processed within the 15-day period, Rollman said.

The National Association of Insurance Commissioners, he said, has established a standard that 93% of claims be paid within 15 days. Georgia "is far more stringent than the NAIC standard, and United is still far exceeding it," Rollman said.

United HealthCare, he added, has been in discussions with the commissioner's office for some time trying to get the matter resolved, but Oxendine "abruptly ended those discussions last week."

The hearing is scheduled for Oct. 31 at the commissioner's office in Atlanta.

Georgia's law that health-care providers be paid within 15 days is challenging for any health insurer, company officials have said. The state's prompt-pay requirements are among the most stringent in the nation (BestWire, Nov. 5, 2003). Texas's prompt-pay law, by comparison, requires payment within 45 days of receipt of a "clean claim" as defined by Texas Department of Insurance rules (BestWire, April 4, 2002).

In Georgia, a dozen health plans collectively were fined more than $1 million after initial reviews in 2000 and 2001. To make sure health plans were complying with Georgia law, Oxendine issued a directive in August 1999 that all health plans licensed in Georgia would be required to submit claims data every quarter, beginning with the third quarter of 1999 (BestWire, March 12, 2002).

Separately, UnitedHealth Group released third-quarter earnings Oct. 14, the first of the big managed care companies to report quarterly results.

UnitedHealth's net income jumped 20.6% to $842 million from $698 million.

The increased profits largely reflected improvement in the medical loss ratio, wrote Scott J. Fidel, senior managed care analyst with JPMorgan Securities, in a research note.

UnitedHealth, the second-largest U.S. health insurer based on membership, saw commercial business membership, which includes risk-based and fee-based, increase to 28.5 million members from 25.9 million members in the third quarter of 2004.

In July, A.M. Best Co. placed the debt ratings of UnitedHealth Group and the financial strength and issuer credit ratings of its subsidiaries under review with negative implications, following the announcement that UnitedHealth signed a definitive merger agreement with Cypress, Calif.-based PacifiCare Health Systems Inc. (NYSE:PHS). United HealthCare of Georgia currently has a Best's Financial Strength Rating of A (Excellent), while United HealthCare Insurance Co. is rated A+ (Superior). Most of UnitedHealth's operating units have ratings ranging from A+ to A- (Excellent).

On the afternoon of Oct. 14, UnitedHealth's stock was trading at $56.33 a share, up 3.93% from the previous close.