Amerigroup will pay $225 million to settle allegations by federal and Illinois state authorities that Amerigroup's health plans denied coverage to pregnant women and people with health ailments in the Illinois Medicaid program, the insurer and the U.S. Department of Justice said on Thursday, Reuters reports (Dixon et al., Reuters, 8/14).

Cleveland Tyson, a 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. In March 2007, a federal judge in Chicago ruled against Amerigroup and awarded $334 million in the lawsuit.

Amerigroup, which first announced the proposed $225 million settlement agreement in July, 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 (Kaiser Daily Health Policy Report, 7/23). DOJ also said that the insurer's appeal of the $334 million court judgment will be dismissed as part of the settlement.

Amerigroup last month announced a second-quarter loss of $162.5 million on a one-time, after-tax charge of $199 million for the settlement and said that it will pay for the settlement from an already established fund.

In a statement, Patrick Fitzgerald, the U.S. attorney for the northern district of Illinois, said, "A settlement of this magnitude sends the clear message that this office takes health care fraud very seriously," adding, "This case also illustrated the perils a defendant faces in taking a case such as this to trial." Amerigroup said it agreed to the settlement to reduce the legal and financial uncertainty for the company. In a statement, Amerigroup Chair and CEO James Carlson said, "Our responsibility to our shareholders, associates, members, providers and government partners is to close this chapter now and move toward the future" (Reuters, 8/14).