United settles suit with Nebraska over complaint procedure

Experts say the case highlights the tension between insurers wanting to centralize grievance operations and states, doctors and patients wanting them handled locally.

By Pamela Lewis Dolan — Posted June 11, 2007

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UnitedHealth Group agreed to a $650,000 settlement with the Nebraska Dept. of Insurance, thought to be the largest settlement in the department's history.

Experts say that although the fine is significant, more significant is the strong message to insurers that if they want to enter the local markets, they have to play by local rules.

The settlement resolves charges that the insurer violated several state insurance laws relating primarily to grievances and claims payments. The company has denied the charges and did not have to admit guilt in the settlement.

In addition to the $650,000 fine, the Nebraska Dept. of Insurance also mandated that United have representatives located within the state to handle local grievances as opposed to a centralized, national department to handle them. The insurance department also will conduct quarterly reviews of the grievance process as part of the settlement.

"This settlement resolves some historical issues that resulted from market conduct exams and complaints from several years ago that we felt were important to address," said Tim Wagner, director of the Nebraska Dept. of Insurance, in a prepared statement.

United is the second largest insurer in Nebraska, as well in the country, based on number of members.

The charges, filed December 2006, stemmed from a market conduct exam by the Dept. of Insurance from July 1, 2003, to June 30, 2004, after several consumer complaints were filed against the insurer.

The company says violations were not committed but that administrative errors, which since have been corrected, led to the allegations.

In an e-mail to AMNews, United spokesman Tyler Mason wrote, "We embrace the concept of the Market Conduct Exam and its purpose, and as a result of the findings we have taken immediate action and have implemented new systems and processes to better serve our members and contracted physicians and hospitals. We continually strive to be the best health and well-being company in Nebraska, and will focus on any area that provides an opportunity for us to improve our performance."

David Filipi, MD, chair of the Nebraska Medical Assn.'s committee on health care insurance, said that what gives this settlement some teeth is how it forces United to handle complaints locally. "A monetary fine is OK, but it doesn't really change the process."

Stanley J. Milavec Jr., MPH, chair of the Healthcare and Biotechnology Group of the Philadelphia law firm Mitts Milavec LLC, said the settlement has national implications, because most insurers are struggling with the balance between centralizing parts of their business to save money while trying to meet the demands of the local market.

The message sent was that "if insurance companies misstep and aren't sensitive to the demands of the local market ... the state department of insurance will step up to the plate and say you need to do more here in order to avoid penalties we can impose on you," Milavec said.

While the specific claims in this case were unique to Nebraska, they stem from the same abuse of power United has been charged with in other states, Dr. Filipi said.

Baltimore attorney Jay Schwartz, of Schwartz and Metz, agreed, "If you listen to the doctors complain, United's the company at the top of the hit parade."

Schwartz is the outside counsel for the Maryland State Medical Society in its suit against United, which alleges that the company was coercing physicians illegally into its PPOs. United has denied the charges.

"Their whole tactics are overbearing. They refuse to work with bona fide concerns," Schwartz said. "There's really a corporate mentality that you do it our way or you don't do it at all."

Dr. Filipi said he's confident local United representatives in Nebraska will do all they can to make things run more smoothly at the local level.

"But the friction is between the local representatives and their national representatives who are bent on saying they want to create one system that's good for all members across America, and we don't want to duplicate costs by having a grievance officer here and one there, that type of thing," he said.

Other state cases against United or one of its subsidiaries include:

  • The Medical Society of the State of New York and several individual doctors filed suit against Oxford Health Plans and United in November 2006 alleging that the companies illegally coerced doctors into doing business with them. The lawsuit is still pending.
  • The Medical Assn. of Georgia filed an open-records request to the Georgia Dept. of Community Health asking for fee schedules and contracts for physicians participating in the State Health Benefits Plan, of which United is the third-party administrator. United has filed for an injunction and the case is still pending.
  • In Missouri, an individual doctor filed suit last year alleging United was not paying its claims promptly. The court found United had not complied with prompt-pay laws, but that those laws were preempted by the Employee Retirement Income Security Act. The doctor is considering an appeal.

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