Health insurers reach $17 million settlement over 'deceptive ...





by Keith L. Martin

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.

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