Amerigroup Settles Discrimination Lawsuit for $234 Million

Insurance company Amerigroup Corp. said on Jul 22 that it has agreed in principle to settle for $234 million a lawsuit accusing it of discriminating against pregnant women and other high-risk patients.

The settlement includes $225 million to be paid to the federal government and the state of Illinois plus $9 million in legal fees, the company said in a statement issued from its Virginia Beach, Va., offices.

A federal judge in Chicago in 2007 ordered the company to pay $334 million plus fees after a jury found it avoided pregnant women and others while receiving Medicaid money designed to assure services to them through the Illinois Department of Public Aid (IDPA).

Amerigroup said it would admit no wrongdoing under the settlement.

“We are concluding this litigation now to remove a source of significant legal and financial uncertainty for our organization,” said James G. Carlson, Amerigroup’s chairman and chief executive officer.

“With this matter resolved we can concentrate fully on the business at hand, meeting the health care needs of our members and continuing to serve our government partners,” Carlson said. It would be best “to close this chapter now and move toward the future,” he said.

The case was before the 7th U.S. Circuit Court of Appeals in Chicago when the settlement talks got under way.

The dispute began with a so-called whistleblower lawsuit filed by Cleveland Tyson, a former lobbyist for Amerigroup’s Illinois subsidiary. The federal government later joined the lawsuit.

Under federal whistleblower law, Tyson stands to collect 15 percent to 25 percent of the final judgment in the case.

Samuel B. Cole, an assistant U.S. attorney who represented the government, declined to comment.

Illinois Attorney General Lisa Madigan said in a statement that “our goal has been to send a clear message that the state of Illinois will not tolerate interference with the health and well being of Illinoisans.”

Amerigroup said in its statement that the company would reap a $35 million tax benefit from the settlement and take a one-time charge of $199 million in the second quarter that ended June 30.

It said the company will pay the settlement from restricted funds previously established to cover costs related to the judgment. After the payment, which is expected to occur in the third quarter, the company’s unrestricted cash balance will increase by approximately $117 million due to the release of the remainder of the restricted funds.

The 13-year-old company reported $3.9 billion in revenues in 2007 and provides services to 1.7 million people in Florida, Georgia, Maryland, New Jersey, New Mexico, New York, Ohio, South Carolina, Tennessee, Texas and Virginia.