NEW YORK (CNNMoney.com) -- California regulators are seeking fines of up to $9.9 billion from Pacificare over allegations the health insurer mismanaged claims from physicians, failed to make payments in a timely manner and other violations.
The California Department of Insurance alleges that Pacificare, which was bought by UnitedHealth Group in 2006, violated the state's insurance code 992,000 times between 2006 and 2007.
Each of those violations carry a fine of up to $10,000 each, according to CDI spokesman Ioannis Kazani.
The National Association of Insurance Commissioners said the $9.9 billion fine, if enacted, would be the largest the group has seen.
In court documents filed last year in Sacramento, CDI says an investigation in 2007 found that Pacificare routinely failed to disclose all benefits, coverage, time limits or other provisions in insurance policies. It also found claim files were often missing certain documents and that payments were not made on time.
The allegations have been the subject of an ongoing hearing conducted before an administrative law judge, who is reportedly nearing a verdict after nearly 10 months.
The California Insurance Commissioner, Steve Poizner, who filed charges against Pacificare in 2008, will make the agency's final decision on the fines following the judge's recommendation.
Pacificare and UnitedHealth (UHC) dispute the state's claims, saying regulators have inflated the fines to score political points ahead of election season.
"The inflated figure has no basis in reality," said UnitedHealth spokesman Tyler Mason. "The largest fine in department history [that] we're aware of was $8 million for alleged behavior far more egregious than the supposed issues here."
This is not the first time Pacificare has been fined by state regulators. In 2008, the Department of Managed Health Care, another California regulator, fined the company $2 million over more than 130,000 alleged claims handling violations.
In this current case, analysts doubt that Pacificare will ultimately pay the maximum $9.9 billion fine.
"The '$9.9 billion' figure does not represent (or come close to representing) a reasonable basis for the possible liability, in our view," Matthew Borsch, an analyst at Goldman Sachs, wrote in a research report. "Our understanding is that the vast majority of the alleged violations are technical and/or administrative in nature."
Investors are already sifting through the Brexit market rubble for opportunities. Morgan Stanley compiled a list of highly-rated stocks that have limited or no direct exposure to the situation in the U.K. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More