The payment by Coventry Health Care Inc. is related to the company gaining advantage over competitors by allowing its employees to inappropriately access a federal Medicare database, according to the Maryland U.S. attorney's office.
Aetna said in August it will pay about $5.6 billion to acquire Coventry and the Hartford-based company will take on Coventry's debt, driving up the transaction price to $7.3 billion.
According to an agreement with prosecutors, top officials at Coventry Health Care Inc., which is incorporated in Delaware but headquartered in Bethesda and provides group and individual health insurance to some five million members nationally, knew of the inappropriate use of the database and did nothing to stop it until a federal agency raised concerns.
The agreement says employees with Coventry, which administers Medicare Advantage plans for some of its customers, or its subsidiary First Health Priority Services, inappropriately accessed the federal government's database between 2005 and 2006 to obtain eligibility information for customers who had separately filed a worker's compensation claim, prosecutors said.
The Coventry employees were allegedly reviewing the customers' eligibility to inform them on the potential sale of Medicare "set-aside" products that would allocate worker's compensation settlement funding to pay for future medical costs that Medicare would otherwise pay for, prosecutors said.
The set-aside product entered Coventry's portfolio as part of its acquisition of First Health in 2005, and represented less than one fourth of one percent of its revenues since, the company said.
Coventry employees had legitimate access to the database for some work functions, but checking on the Medicare eligibility status of individuals with compensation claims was not one of them, prosecutors said.
According to the agreement, the Centers for Medicare and Medicaid Services contacted Coventry with concerns about the inappropriate access in January 2007, and Coventry officials acknowledged that access and promised to stop it.
The agreement says the company's senior vice presidents for worker's compensation services, government programs and service operations, and the manger of its Medicare enrollment, knew of the access. Those officials have since left the company.
In addition to the $3 million payment, Coventry also agreed to hold regular training for employees on appropriate database use, prosecutors said.
In a statement, the company said it fully cooperated with investigators.
"The conduct by these employees was a violation of Company policy, and Coventry has put several new measures, controls, policies and trainings into place to prevent violations in the future," the company said.
Courant staff writer Matthew Sturdevant contributed to this report.