DMHC Fines Kaiser, Universal $150,000

The Department of Managed Health Care levied fines last month against Universal Care and Kaiser Foundation Health Plan totaling $150,000.

Universal, which is based in Signal Hill, was fined $100,000 for a variety of fiduciary violations, including failure to maintain a fidelity bond for all its officers and directors, engaging in unfair payment practices, failure to pay claims in a timely manner and fees and interest on late claims, and failure to maintain tangible net equity.

The lack of a fidelity bond was an ongoing issue for more than two years, between mid-March 2009 and late March 2011, records show. According to correspondence between the DMHC and the health plan, Universal did not have a fidelity bond in place at all during this period.

The DMHC also concluded that Universal had engaged in unfair payment practices – failure to justify why it denied a claim – in nine of 20 claims it randomly sampled. And regarding late claims, it failed to pay interest and additional fees in 18% of the claims that the DMHC sampled.

The payment issues were uncovered as part of a routine financial examination that occurred in 2011 and apparently were lingering from Universal's last examination in 2007.

As for the failure to maintain tangible net equity – liquid assets on hand in order to settle claims – Universal had about $766,000 cash on hand in the fourth quarter of 2010 when it was required to have at least $1 million. That violation was the third Universal has had regarding its tangible net equity since 2012, the DMHC noted.

Universal remedied the issues by having more cash on hand and making back payments on claims dating to 2007. That sum was not available. 

The penalty was the third $100,000 fine Universal has paid to the regulator since 2011. It had previously been fined for engaging in unfair payment practice patterns. It paid a total of $252,500 in fines in 2002 and 2004 for tangible net equity violations. 

Universal officials agreed to pay the current fine in eight monthly installments of $12,500 apiece.

Oakland-based Kaiser was fined $50,000 for also engaging in what DMHC had concluded was an unfair payment practice pattern. A routine and random survey of Kaiser's late-paid claims in 2012 concluded that it had failed to pay the appropriate interest and penalties in 9% of all cases. A 5% non-compliance rate is the maximum allowed under state law. Of denied claims, Kaiser did not sent clear explanations as to why the claim was denied 19% of the time. The DMHC noted that Kaiser had had similar problems during a 2011 survey.

Kaiser resolved the issue by paying interest and penalties connected to 423 claims of more than $20,500, records show.