In what is believed to be the largest consumer protection settlement against a health plan in Massachusetts history, a Texas-based insurer and two of its subsidiaries will pay $17 million to consumers and stop writing new business in the state.
Massachusetts Attorney General Martha Coakley announced a settlement agreement with North Richland Hills, Texas-based HealthMarkets Inc. and its subsidiaries, the MEGA Life and Health Insurance and Mid-West National Life Insurance. The carriers targeted the self-employed and small business owners in Massachusetts through sales of products packaged with association memberships in the National Association for the Self Employed, Americans for Financial Security and the Alliance for Affordable Services.
Under the settlement, the defendants will pay more than $17 million in consumer relief, penalties and costs, according to Coakley’s office.
The funds will be used to help current or former policyholders in the state whose claims for certain benefits, mandated under Massachusetts law, were denied based on purported lack of coverage, and others denied on illegal pre-existing condition exclusions or waiting periods.
The latest trouble for HealthMarkets comes nearly a year after the National Association of Insurance Commissioners, representing 29 states, levied a $20 million fine against HealthMarkets, following a multi-state market conduct exam. The exam found numerous problems involving consumer disclosure, oversight and training of agents, claims handling and complaint-handling practices.
The company also agreed to pay a $1 million fine and $4.6 million in restitution to policyholders in Maine in April 2008 regarding premium overcharges.
Under the Massachusetts agreement, the carriers will also be banned for at least five years from selling their plans in the state and must exit the Massachusetts health plan business completely. The carriers can, under the settlement, renew existing health plans with individuals and small businesses through 2012, giving current policyholders an opportunity to obtain other coverage, officials said.
The settlement also bars what the attorney general’s office deemed “unfair and deceptive” acts that were the subject of a suit. These practices include deceptive advertising, predatory sales practices, failing to provide health benefits mandated by law and unfairly disclosing consumers’ personal information to third-parties.
Martha Coakley
Coakley said in light of health reform in Massachusetts, including an individual mandate for coverage, “it has been even more important to stop predatory practices in the health insurance market.”
“We have vigorously sought to hold companies accountable for such practices and this settlement is an important step forward in our efforts,” she said in a statement. “These companies used unfair and deceptive marketing and other practices to convince Massachusetts residents to buy health plans with limited benefits. Massachusetts health care consumers must be fairly told what they are buying, and their premium dollars should be used predominantly to pay health care benefits and not inflated commissions, overhead and profits.”
Coakley’s office said a multi-year investigation by its staff and the Massachusetts Division of Insurance resulted in what is believed to be a record settlement between a health plan and the state. The office first filed suit against the Texas carrier and its subsidiaries in 2006, alleging failure to meet state coverage mandates. That suit was amended in 2007 to add the claims of deceptive practices.
In November 2007, the attorney general’s office reached a preliminary agreement with the defendants prohibiting them from engaging in certain practices outlined in the amended complaint.
Health insurers reach $17 million settlement over ‘deceptive’ conduct via IFAwebnews .