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Shareholders Sue UnitedHealth & PacifiCare

SANTA ANA, Calif. (CN) - Shareholders filed a derivative lawsuit against UnitedHealth Group and PacifiCare Health Systems, claiming the company's claims-processing violations could cost it $650 million to $1.3 billion in fines in California alone, in addition to sanctions from 36 other states.

UnitedHealth bought PacifiCare in 2005. Plaintiffs claim that "since 2004, UnitedHealth has paid record penalties for improperly processing claims in six states. Moreover, in September 2007, UnitedHealth entered an agreement with 37 states, including California, to fix its claims processing system and pay millions of dollars in assessments and/or fines. ... The September 2007 settlement, however, was not the end of UnitedHealth's claims processing or legal problems. On Jan. 29, 2008, the California Department of Insurance ('CDI') and the California Department of Managed Health Care ('DMHC') 'announced a joint action against PacifiCare companies, owned by UnitedHealth Group, in response to more than 130,000 alleged claims handling violations.'

"The violations included wrongful denial of claims, incorrect payments, failure to acknowledge receipts of claims, repeated requests for documentation and delays in handling claims. On the same day, CDI Insurance Commissioner Steve Poizner stated: 'After years of broken promises to California regulators, it became crystal cleat that PacifiCare simply could not or would not fix the meltdown in its claims paying process.' According to the two California agencies, the company could be responsible for anywhere between $650 million to $1.3 billion in fines."

Shareholders say the defendants are sophisticated companies and knew, or should have known, what they were doing: "Defendants - the majority of whom have served as directors of the company since at least 2000 - have either caused UnitedHealth to process claims in a manner that repeatedly violates state laws and regulations or have failed to exercise the proper oversight and supervision required of them to prevent UnitedHealth from repeated violating the law."

Plaintiffs are represented in Orange County Court by Michael Goldberg with Glancy Binkow & Goldberg of Los Angeles.

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