Tuesday’s massive rally notwithstanding, the latest Fed rate cuts aren’t good for everyone. Amerigroup (AGP), a Medicare and Medicaid HMO based in Virginia Beach, said Wednesday morning that the latest decline in rates will hurt full-year earnings by weakening returns in the company’s investment portfolio. Amerigroup said it expects to make between $2.46 and $2.61 a share for 2008, down from its previous guidance of $2.58 to $2.73 a share. “We have been able to absorb previous rate cuts by the Federal Reserve in our guidance,” finance chief James Truess said, but “we believe yesterday’s action will further impact us during the remainder of 2008.”

On the bright side, Amerigroup said medical costs for the first quarter have been in its expected range and that its reserves appear adequate to handle all claims. Earlier this month, big HMOs WellPoint (WLP) and Humana (HUM) warned of slowing enrollment and rising costs, sending shares across the health insurance sector plunging. Given that Amerigroup says its problem is less an operating issue than an investing one, it may be able to avoid a steep drop in trading Wednesday.

Health insurance stocks swooned in late trading after WellPoint (WLP) slashed its 2008 earnings guidance, citing slowing enrollment and rising medical costs. “We are making these revisions to our prior earnings guidance due to higher than expected medical costs, lower than expected fully insured enrollment and, to a lesser extent, the changing economic environment in which we are operating,” said CEO Angela F. Braly. The company now expects to make $5.76 to $6.01 a share - down from the previous guidance of $6.41. WellPoint fell $12.14 to $54.98, while UnitedHealth (UNH) dropped $4.71 to $40.50 and Wellcare (WCG) slid $3.98 to $39.90.

UnitedHealth (UNH) tumbled 3% Tuesday after the Los Angeles Times reported the health insurer could face a billion-dollar fine tied to failures to pay claims. The newspaper says the California insurance department “uncovered 133,000 alleged violations of state laws and regulations regarding payments for medical care” at UnitedHealth’s Pacificare unit, which was acquired by the Minneapolis-based HMO two years ago. The Times says a separate probe of Pacificare by the state department of managed health care found that 30% of medical claims it reviewed were improperly denied.

The findings won’t surprise HMO customers, most of whom are no stranger to bureaucratic indifference. Still, UnitedHealth insists it has taken steps to fix the problems and that many of the issues have been resolved. UnitedHealth, which previously scored headlines for an executive pay scandal tied to the apparent manipulation of stock option grants, adds that it doesn’t believe it deserves a big fine.

“While there is a theoretical maximum penalty, we believe the commissioner will take into consideration the fact that the vast majority of the violations were administrative in nature and did not result in harm to our members,” the company said in a press release Tuesday. “For example, over 80,000 of the noted violations were related to not sending providers an acknowledgement letter for claims received. However, the majority of these claims were paid on time.” Of course, that still leaves a minority of customers whose claims were delayed or ignored. Chances are good that they would like to see Pacificare face justice - and get the maximum penalty.

Former UnitedHealth (UNH) CEO Bill McGuire is in a giving mood this holiday season. The executive, who left the company last year under the cloud of an investigation of the HMO’s accounting practices, agreed Thursday to give back more than $400 million worth of stock and benefits to settle a shareholder lawsuit against UnitedHealth. McGuire also agreed to settle a Securities and Exchange Commission civil suit tied to the matter, The Wall Street Journal reported.

UnitedHealth had to restate earnings last year to fix its accounting for hundreds of millions of dollars in stock options that were doled out to McGuire and other execs at a discount to the existing stock price — handing them windfall gains. Back in April 2006, when the so-called backdating scandal came to light, McGuire’s stock option haul was worth an estimated $1.6 billion. Though McGuire insisted throughout that UnitedHealth had engaged in no backdating, a law firm hired by the company later ascertained that “certain facts run contrary to this assertion.” Seems like that’s always the case in CEO land, though.