California high court won't review $91M fine against UnitedHealthcare

The California Supreme Court said it won't review a lower court's decision last year that could set the stage for Minnetonka-based UnitedHealth Group paying a $91 million fine to the state's insurance commissioner.

In September, an appeals court ruled in favor of California regulators in their attempt to impose fines on a UnitedHealth subsidiary called PacifiCare related to more than 900,000 alleged violations of state law on insurance claims.

After the ruling, UnitedHealth said it would appeal the matter to the California Supreme Court, but the court late Thursday said it would not review the case.

"I am delighted the Supreme Court has rejected further challenges to the insurance commissioner's authority to punish insurance companies for knowingly harming even one consumer," said Dave Jones, the California Insurance commissioner, in a statement. The California Department of Insurance said Friday the ruling "paves the way for a ruling reaffirming $91 million in penalties."

UnitedHealth Group issued a statement saying the legal fight will continue.

"There's been no determination of a potential fine for this old case involving routine claims payment issues," the company said. "We will continue our legal challenge."

In 2005, UnitedHealth Group acquired PacifiCare for $9.2 billion in a deal that was one of the biggest health plan mergers at the time. Two years later, UnitedHealth Group officials acknowledged in an unusual public confession that the company had forced new technology and business practices too quickly in new markets such as California, resulting in "physician resentment, network disruptions and operational overload."

UnitedHealth pledged to pay claims faster and repair relationships with doctors, and the California Medical Association told the Star Tribune in 2010 that PacifiCare seemed to have solved problems.

The California Department of Insurance in 2008 filed an enforcement action against PacifiCare, alleging the insurer engaged in multiple unfair claims settlement practices and other violations of the insurance code. Following a hearing, the insurance commissioner found PacifiCare engaged in over 900,000 acts and practices in violation of the code.

The insurance commissioner ultimately imposed $173 million in penalties, but UnitedHealth Group has pointed in the past to an administrative law judge's recommendation of a much smaller $11.5 million fine in the case.

UnitedHealth filed a lawsuit in July 2014 in the Superior Court of Orange County challenging the commissioner's decision, and the court split the case into two phases. One phase was addressed by this week's decision, and the second phase will now move forward, according to state regulators.

"The court of appeal's first-phase decision [in September] thus paves the way for a ruling reaffirming $91 million in penalties involving PacifiCare's claims-handling practices following the corporate acquisition," the California Department of Insurance said Friday in its statement. "In the second phase the superior court also reversed $82 million in penalties on other grounds. An appeal of that decision is pending in the court of appeal, to follow the decision just released."

"The second phase decision has been appealed by both sides, but has not yet been briefed," the insurance department said.

Christopher Snowbeck • 612-673-4744 Twitter: @chrissnowbeck