For Release: December 13, 2010
Media Calls Only: 916-492-3566
Insurance Commissioner Steve Poizner today issued an order blocking PacifiCare Life & Health Insurance Co. from paying its parent company a $120 million dividend, saying PacifiCare may need the money to pay penalties in an enforcement action the Department of Insurance is presently prosecuting.
"Nobody knows what the outcome of the enforcement action will be," Poizner said. "But it is entirely possible that allowing United to siphon off $120 million would enable them to turn penalties into profits. My order simply requires that the company keep the money where it would be available to satisfy any order that is issued."
After UnitedHealth Group purchased PacifiCare Health Systems in 2005 for $8 billion, the Department of Insurance began receiving hundreds of complaints from consumers and doctors regarding improper handling of thousands of claims. An examination resulted in the Department charging PacifiCare with over 130,000 violations of law. Each violation is subject to a penalty of up to $5,000, or $10,000 if the violation was willful.
The company demanded a hearing on the charges, which commenced last December and is still pending before an administrative law judge. As the case has unfolded, the Department has found additional violations. PacifiCare is now charged with nearly 1 million violations, each subject to penalties of up to either $5,000 or $10,000.
PacifiCare gave legal notice last week that it intends to pay $120 million in dividends to two subsidiaries of United.
Today's order notes the possibility that PacifiCare may be found liable for penalties that, in the aggregate, exceed the amount left after the dividend is paid out.
The order gives PacifiCare the right to a hearing where it may protest the freeze on its dividends.
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