A company that sells health insurance business support services is suing a large managed care company over a contract cancellation.

TMG Health Inc., King of Prussia, Pa., says it has filed a lawsuit against UnitedHealth Group Inc., Minnetonka, Minn., in the U.S. District Court in Philadelphia.

The dispute concerns efforts by TMG to provide support services for a Medicare private fee-for-service plan that PacifiCare Health Systems Inc., Cypress, Calif., planned to launch in September 2005.

UnitedHealth agreed to acquire PacifiCare in July 2005.

TMG says it was told that UnitedHealth would keep the PacifiCare FFS support services contract. Instead, UnitedHealth canceled the contract soon after it acquired PacifiCare, TMG says.

UnitedHealth agreed in November 2006 to pay $5.2 million to settle the disputes arising from the cancellation, but now it has stepped away from that agreement, TMG says.

TMG says it now is seeking $25 million in compensation.

UnitedHealth says it never entered into a settlement agreement with TMG.

“UnitedHealth Group believes our operations were adversely impacted by TMG Health under the terms of our contract,” UnitedHealth says. “UnitedHealth Group will defend itself against TMG Health’s compliant.”

The contract between TMG and UnitedHealth “supports arbitration as the most effective means to resolve this issue,” UnitedHealth adds. “Once we have received and reviewed the complaint, we intend to vigorously defend our interest and pursue arbitration in the appropriate California venue.”