PacifiCare Blocked from Paying $120 Million in Dividends

Cheryl Clark, December 14, 2010

California's insurance commissioner on Monday blocked PacifiCare Life & Health Insurance Co., a major California health plan, from paying its parent company UnitedHealth Group $120 million in a dividend, saying the money may be needed to pay penalties ordered by the state.

"It is entirely possible that allowing United to siphon off $120 million would enable them to turn penalties into profits," said Insurance Commissioner Steve Poizner. "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 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, Poizner said in a statement.  After an examination, the department charged PacifiCare with over 130,000 violations of law, each subject to a penalty of between $5,000 or $10,000. The issue involves 130,000 of PacifiCare's 1 million California customers.

A hearing on the charges began last December and is still pending before an administrative law judge, but as the case has evolved, state officials say they have found additional violations.  That now means PacifiCare has been charged with nearly one million violations.

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