PacifiCare Life and Health Insurance Company (PacifiCare) today sued
California Insurance Commissioner Dave Jones, seeking to overturn an
egregious, overreaching action against the company stemming from a
series of long-resolved administrative errors.
The lawsuit filed by PacifiCare in Orange County Superior Court seeks
judicial review of a multiyear action by the California Department of
Insurance (CDI), and of the Commissioner's decision to impose a fine of
$173.6 million against the company. That decision ignored the state
administrative law judge's August 2013 finding the penalty should be
$11.5 million, sharply lower than the Commissioner's proposal.
By treating errors in standard health insurance paperwork more severely
than errors directly affecting patient health or the integrity of their
policies, the Commissioner threatens to make California's health care
system slower, less efficient, more breaucratic and more expensive.
The needlessly long case involved largely technical and administrative
issues that arose in 2007 that PacifiCare self-disclosed to the CDI,
caused no harm to members or providers, and were resolved within months.
The Commissioner's unprecedented decision to pursue an enforcement
action even though all of the issues had been resolved resulted in more
than three years of hearings on the matter, hearings that included
hundreds of hours of testimony, the review of thousands of pages of
exhibits, and more than $10 million in Californians' tax money spent by
CDI on outside lawyers. After all that, even the Commissioner
acknowledged there is no basis for paying restitution either to members
The Commissioner, who did not attend one day of the three-year hearing,
has not explained why he waited nearly a year - until June 9, 2014 - to
issue a fine fifteen times what the California administrative law judge
"This ruling threatens to paralyze the health care system in the state,
resulting in more costs and bureaucracy for Californians," said Stephen
Scheneman, president of PacifiCare Life and Health Insurance Company.
"We are taking this action to protect the interests of our customers who
depend on the availability of affordable health insurance. Access to
affordable health care depends on balanced regulation that does not
impose irrational costs and are potentially disruptive to the market.
"As we have done since 2008, we plan to continue to vigorously defend
ourselves and our members in this matter."
PacifiCare Life and Health Insurance Company offered group and
individual PPO health plans, Medicare Supplemental plans and specialty
benefit plans in California.
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