PacifiCare to Settle Inflated Claims Suit

PacifiCare Health Systems Inc., one of California’s biggest health insurers, agreed to pay the federal government $87.3 million to settle accusations that it had submitted inflated claims for insurance payments.

The settlement was the largest civil agreement involving contracts with the Office of Personal Management. The contracts provided benefits to 9 million federal employees and their dependents under the Federal Health Benefits Program.

The Justice Department had accused PacifiCare and its predecessor companies of violating the False Claims Act by basing its bills on rates that weren’t developed in accordance with U.S. regulations and rating instructions.

The Santa Ana-based health insurer, which didn’t acknowledge any wrongdoing, said it had set aside reserves to pay the settlement. A release of excess reserves of $12.8million pretax will add 23cents a share after taxes to first-quarter earnings, it said.Shares of PacifiCare rose 86cents to $19 on Nasdaq before the news was released.