UnitedHealthcare promises reform in deal with state regulators

UnitedHealthcare is paying $12 million, and promising to improve its claims payment procedures and physician communication, under the terms of the first-ever multistate settlement between a health plan and insurance regulators. It closes a three-year investigation into the company's payment practices.

The agreement between United and 36 states and the District of Columbia includes specific penalties if United does not meet minimums for claims accuracy -- 96% in 2008, and 97% in 2009 and 2010 -- and is the subject of too many physician and patient complaints.

While physicians will receive none of the $12 million, which goes to state insurance departments, they might receive some back payment for claims, plus interest, that the insurance regulators or the company discovered to be "erroneous." Claims no more than three years old are eligible.

But much of the agreement includes general goals with little outline on how exactly they would be reached, and how physicians would benefit, say organized medicine representatives. For example, the settlement agreement doesn't say exactly how much in back claims will be paid, or what the interest rate would be.

American Medical Association President Ronald M. Davis, MD, a preventive medicine specialist from East Lansing, Mich., said the Association is requesting "clarification and guidance" from state insurance commissioners on "how the settlement terms will be interpreted and enforced for the benefit of the physicians and their patients."

The United agreement offers little specific information compared with the federal court settlements reached with other large insurers, said Matthew Katz, executive director of the Connecticut State Medical Society.

Physicians had sued those insurers for conspiring to defraud doctors by reducing and denying reimbursement in violation of the federal Racketeer Influenced and Corrupt Organizations Act. United was among the few not to settle, and last year a U.S. District Court judge in Miami dismissed all claims against the company. Doctors are appealing.

Iowa Insurance Commissioner Susan Voss, who was among the five state representatives negotiating the deal, said the agreement gives the insurer a clear path and a deadline for fixing what was broken in its claims payment system.

"They've got three years to improve their process, and then if they don't, it's not going to be a pretty sight," Voss said. "This is going to cost them money and time and probably some heartburn, and we're going to be meeting with them on a regular basis."

United did not admit wrongdoing in the multistate settlement. Its CEO, Kenneth Burdick, said in a prepared statement that the agreement "breaks new ground in how we can work with states across the country for the benefit of our members and business partners." Company spokesman Tyler Mason said it is always United's intent is to comply with all states' regulations.

The settlement agreement requires United to hire an independent examiner to report periodically on the company's progress and compliance with the agreement over the next three years.

Voss said both sides could claim to have come out ahead in the deal.

"It's a victory for the states because it really demonstrates we can work together," she said. "And I suppose it's a win for UnitedHealthcare because instead of staring down 50 different regulatory actions, they've got at least 37 [jurisdictions] now on board for one plan of improvement."

The agreement is technically between the United entity in each state and that state's insurance regulatory agency.

The settlement amount payable to each state is determined by the number of United members living there, with United paying about $3.31 per member to state insurance departments. Voss said other states may still sign onto the deal, which would then increase United's payment.

The current $12 million settlement averages out to $324,324 per jurisdiction. That's about half of the $650,000 settlement United negotiated in May with insurance regulators in Nebraska to settle an investigation regarding how it handled consumer complaints. For the first six months of 2007, UnitedHealth Group had profits of $2.1 billion on revenue of $38 billion.

Voss said the amount of money was not as important as United showing a commitment to fix what was broken in its claims system.

"Maybe it's not as big as maybe other people would have liked, but the end product is to get [United] to clean up its act," she said. "I'd rather they spent their money improving their process and moving forward."

Kathleen O'Connor, a Seattle-based health care consultant and CEO of CodeBlueNow, a nonprofit group that advocates for more citizen voices in health care reform, said, "It's not the hugest settlement, but $12 million is still $12 million, and I think [regulators] monitoring their practices is a heads-up for the industry. because they could come down harder on them the next time."

Dr. Davis said the AMA believes the settlement "affirms a long-standing belief that physicians across the country have been systematically exploited by the unfair claims handling and payment practices of the nation's largest health insurers."

"We remain hopeful that this settlement reflects a commitment by UnitedHealthcare to change its unfair payment practices and medically inappropriate corporate policies," he said.