By Deena Beasley

LOS ANGELES (Reuters) - California regulators are seeking fines of up to $9.9 billion from a unit of health insurer UnitedHealth Group Inc, citing mismanaged medical claims, failure to pay doctors and other lapses.

The California Department of Insurance alleges that PacifiCare violated state law nearly a million times from 2006 to 2008 after it was purchased by UnitedHealth, the largest U.S. health insurer by market value.

Each violation is punishable by a fine of up to $10,000, according to department spokesman Ioannis Kazani.

UnitedHealth said in an emailed statement that the "allegations concerning claims processing by PacifiCare are simply not true."

The insurer said more than 90 percent of the alleged violations were purely administrative, with the vast majority related to a failure to include certain language in standard claims correspondence during a four-month period in 2007.

"We will continue to defend ourselves in the legal proceedings" with the California Department of Insurance, the company said.

The enforcement action has been the subject of an administrative hearing that began late last year after Insurance Commissioner Steve Poizner filed an order alleging thousands of code violations.

If the Insurance Department proves its case before an administrative law judge, Poizner will make a final decision on fines.

BMO Capital Markets analyst Dave Shove said he believes that if a penalty is ultimately levied, it would be nowhere near $9.9 billion.

"With the potential for appeals, this litigation process is far from the finish line," he said in a research note, adding that headlines calling for strong insurer penalties represent the typical noise expected as midterm elections creep closer.

A second California regulator, the Department of Managed Health Care, fined PacifiCare $2 million over allegations that it improperly denied medical claims for HMO policyholders. The carrier paid the penalty but did not admit any liability.

Share of UnitedHealth were up 1 cent at $33.79 in afternoon trade on the New York Stock Exchange.

(Reporting by Deena Beasley; additional reporting by Bill Berkrot; editing by John Wallace)