DCBS Media Release

March 5, 1999
For more information:
John Piper, (503) 947-7213

PacifiCare fined $50,000 for claims-handling practices

SALEM – Oregon's Department of Consumer and Business Services (DCBS) has assessed a $50,000 fine against PacifiCare of Oregon, Inc., for failure to comply with Oregon standards for the handling of health insurance claims.

The action resulted from a market conduct examination of the company's operations by the Insurance Division of DCBS. Examiners reviewed claims-handling practices of PacifiCare and health care provider groups authorized to handle claims on PacifiCare's behalf for the period of July 1994 to June 1997.

"We found substantial noncompliance with important claims-handling standards," said Deputy Insurance Commissioner Nancy Ellison. "Some of the violations involved claims handled directly by PacifiCare, but the highest levels of noncompliance involved claims handled by provider groups that had been delegated claims-handling responsibilities by PacifiCare.

"Oregon law allows insurers to delegate claims handling, but only under strict insurer supervision," continued Ellison. "Our action in this case reflects the Insurance Division's commitment to requiring insurers to monitor closely provider group compliance with Oregon law."

Ellison also noted that initial follow-up made by examiners indicated significant improvement in PacifiCare's monitoring activity and claims-handling practices.

Among the specific problems identified in the market conduct report were findings that PacifiCare and its authorized provider groups violated Oregon insurance law and administrative rules by:

• Failing within 20 working days to acknowledge or pay claims.
• Failing within 20 working days to notify first party claimants that PacifiCare needed more time to determine whether to accept or deny claims and the reason for the delays, and failing to notify claimants every 45 days thereafter while the investigation remained incomplete.

Examiners also determined that PacifiCare, by its authorized provider groups, violated Oregon insurance law and administrative rules by failing to provide a written explanation of the reason for denial in 67 percent of the denied claim files examined, and by denying claims without conducting a reasonable investigation.

Problems with claims handling standards were cited in two earlier market conduct examinations of PacifiCare covering the periods of 1989 to 1991 and 1991 to 1994. In 1996, DCBS fined PacifiCare $20,000 for denying emergency room claims without conducting a reasonable investigation.

The Insurance Division plans to re-examine PacifiCare in late 1999 to ensure that violations have been corrected.