U.S. Attorney Patrick Fitzgerald said the company allegedly canceled coverage of home nursing care for sick children in order to move them into an insurance program funded by the federal and state governments.
The Home and Community Based Services program was designed to prevent children dependent on medical technology from having to be institutionalized.
Under the settlement, the federal government will receive $9.5 million with the balance paid to the state. The total includes $1.25 million for violations of state consumer fraud laws.
BlueCross Blue Shield, a division of Health Care Service Corp., has not admitted any wrongdoing and said it agreed to settle to avoid extended litigation.