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United HealthCare will pay New York $4 million to settle claims processing problems, the largest ever health related settlement entered into by the State Insurance Department, Superintendent Eric Dinallo announced today. This is part of a landmark settlement agreement between the health insurer and 37 states that includes a potential for payments of $20 million and a three-year process improvement plan for United. More than $13 million will be distributed immediately to the participating states.

The settlement follows nationwide complaints and coordinated investigations by numerous state insurance regulators of United HealthCare’s claims practices involving coordination of benefits, appeals and grievances, explanations of benefits, utilization review and other areas.

The investigation found many errors in claim processing, such as not applying correct fee schedules and not applying deductibles correctly. Also, the company frequently violated prompt payment rules. And because of poor controls and oversight, the company was generally unable to correct problems when they were brought to its attention by state regulators.

New York will receive the largest single settlement under the agreement.

“New York will aggressively protect consumers and hold health plans accountable for their actions as this settlement decisively demonstrates,” Superintendent Dinallo said. “Consumers and providers deserve timely claims payments, accurate benefit statements and prompt consideration of appeals, and we will ensure they get it.”

Insurance regulators in the states involved worked jointly under the auspices of the National Association of Insurance Commissioners to achieve the settlement, which covers 26 United HealthCare affiliated insurers and HMOs.

“To bring this many states and a national health insurer together to resolve regulatory deficiencies in health care coverage is indeed a watershed event,” Superintendent Dinallo noted. “We are proud that Lou Felice of this Department played a key role throughout the process.”

The settlement includes a national improvement plan in effect through December 31, 2010. It requires collaborative monitoring of United’s market practices under the direction of the five lead states: New York, Iowa, Florida, Connecticut and Arkansas. The plan establishes benchmarks for improvements to claims accuracy, claims timeliness, appeals review and consumer complaint handling.

Failure to meet those benchmarks could result in up to $20 million in additional penalties to United. Any continuing systemic problems discovered by United’s own internal review or via annual collaborative reviews by an independent auditor under the supervision of the lead states would result in restitution to claimants.

New York received $3.7 million under the collaborative agreement, and an additional $320,000 from a separate agreement between New York and United that was incorporated into the larger settlement. The separate agreement was based on findings that United had violated the New York State prompt payment statute and claim appeal rules, among other violations. United will take specific steps in response to the New York findings, including reviewing and reprocessing delayed claims payments with applicable interest going back to Jan. 1, 2003.

Department of Financial Services


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