(Adds company comment, updates shares)
WASHINGTON Aug 14 Health insurer Amerigroup
Corp AGP.N will pay $225 million to settle federal and state
claims of fraud in a government health insurance program, the
company and the U.S. Justice Department said on Thursday.
The pact, in coordination with Illinois officials, settles
allegations that the company's health plans excluded pregnant
women and unhealthy patients in the Illinois Medicaid plan.
Medicaid is the state-federal health plan for the poor.
"A settlement of this magnitude sends the clear message
that this office takes health care fraud very seriously," said
Patrick Fitzgerald, the U.S. attorney for the northern district
of Illinois, in a statement. "This case also illustrated the
perils a defendant faces in taking a case such as this to
Amerigroup said it agreed to settle in order to lessen
legal and financial uncertainty for the company.
"Our responsibility to our shareholders, associates,
members, providers and government partners is to close this
chapter now and move toward the future," Amerigroup Chairman
and Chief Executive James Carlson said in a statement.
A jury found Amerigroup liable under federal and state law
in October 2006, and the court entered a $334 million judgment
Amerigroup had appealed the ruling but will dismiss the
appeal as part of the settlement, the Justice Department said.
The company also entered into a corporate integrity agreement
with regulators, requiring it to implement new policies to
A former Amerigroup employee, Cleveland Tyson, who filed
the original lawsuit against the company, will receive $56.3
million of the settlement under federal whistle-blower law.
The company, which first announced the proposed settlement
last month, saw a $162.5 million loss in the second quarter
after taking a one-time $199 million charge related to the
litigation. It has said it would pay for the settlement with
funds reserved specifically to cover the judgment costs.
Amerigroup shares were down 1.5 percent at $25.49 in
afternoon trade on the New York Stock Exchange.
(Reporting by Kim Dixon, Diane Bartz and Susan Heavey; Editing
by Tim Dobbyn and Braden Reddall)