Amerigroup settles Medicaid lawsuit over denial of coverage to pregnant women for $225 million

Amerigroup on Tuesday said it will enter a $225 million settlement agreement with Illinois and the federal government over allegations that it denied coverage to eligible pregnant women, the Baltimore Sun reports (Baltimore Sun, 7/23).

Cleveland Tyson, former vice president of government relations at Amerigroup's Illinois subsidiary, in 2002 filed a whistle-blower lawsuit that claimed the company cherry-picked the healthiest patients to reduce spending. The U.S. attorney in Chicago and the Illinois attorney general later joined the lawsuit as plaintiffs. Illinois paid Amerigroup a flat fee per beneficiary that took into account that some people require more costly treatment than others. In March 2007, a federal judge in Chicago ruled against Amerigroup and awarded $334 million in the lawsuit.

Amerigroup said that it also will pay $9 million in legal fees in the settlement, and the company has agreed to enter into a corporate integrity agreement as part of the settlement. Amerigroup will pay the settlement from an already established fund. The company will take a one-time charge of about $199 million net of estimated tax benefit in the quarter that ended June 30, according to an Amerigroup statement (Bloomberg/Chicago Tribune, 7/23).