UnitedHealth to pay $12 million to states

UnitedHealth Group Inc., the largest U.S. health insurer, has agreed to pay at least $12 million to end state investigations into the processing and payment of claims.

UnitedHealth will pay that sum immediately to 36 states and the District of Columbia, the company said Thursday. The Minnetonka, Minn.-based company may have to turn over as much as $20 million more later if it fails to improve over the next three years, according to the company and state regulators.

The agreement bolsters oversight of the company, requiring quarterly reporting on compliance with newly established performance standards. Orchestrated by the National Assn. of Insurance Commissioners, the arrangement is a model for regulation of health insurers, UnitedHealth and regulators said.

“This is a historic settlement,” said Tom Alger, a spokesman for Iowa Insurance Commissioner Susan Voss. “This seems to be a good approach toward looking at national companies with a lot of business across state lines.”

UnitedHealth shares fell 41 cents Friday to $49.19. The stock has declined 8.4% this year.

The settlement grew out of probes that found errors such as applying deductibles improperly, violating prompt-payment rules and failing to follow fee schedules.

“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 State Insurance Superintendent Eric Dinallo said.

The Aug. 27 agreement applies to 26 insurers and health maintenance organizations that operate under the UnitedHealthcare brand. The unit administers benefits for 14 million individual policyholders and people in plans sponsored by small employers. Overall, the company handles medical benefits for 28.7 million Americans.

Each quarter UnitedHealth will report on its compliance with national standards for processing claims. In exchange, the states agreed not to conduct regular examinations of the company’s claims practices.