State Insurance Regulators Levy $20 Million Fine Against Insurers

KANSAS CITY, Mo. (July 24, 2008) — State insurance regulators, working together through the National Association of Insurance Commissioners (NAIC), today announced the details of a $20 million regulatory settlement agreement between 29 jurisdictions and HealthMarkets, Inc., and its affiliated companies, MEGA Life and Health Insurance Company, Mid-West National Life Insurance Company and Chesapeake Life Insurance Company.

The regulatory settlement follows a three-year multi-state exam that found multiple problems involving consumer disclosure, oversight and training of agents, claims handling and complaint-handling practices. HealthMarkets faces up to $10 million in additional penalties if it fails to meet performance standards outlined in the settlement.

The multi-state examination was initiated by Washington State Insurance Commissioner Mike Kreidler and Alaska Insurance Director Linda Hall in 2005 and coordinated through the NAIC’s Market Analysis Working Group.

“This is a good multi-state settlement that addresses some serious violations of our consumer protection laws,” said Montana State Auditor John Morrison, who chairs the NAIC Market Regulation and Consumer Affairs Committee. “By coordinating our efforts through the NAIC, we are better able to expedite a collective regulatory response that protects consumers on a nationwide basis.”


According to the terms of the settlement, the companies must implement an outreach program that includes the following:

• Sending a notice to all policyholders with policies issued prior to Aug. 1, 2005that includes a toll-free number, mailing address and e-mail address where policyholders can ask questions about their coverage. The notice also must include a Web site address for each company.


• Ensuring each method of communication is staffed by someone able to provide detailed information about the policyholder’s specific plan.


• Establishing a Web site with a “frequently asked questions” section, general coverage descriptions, a listing of contact information and information on how to appeal a claim or file a grievance.

In addition, the companies must report progress twice a year through Dec. 31, 2009, on performance standards targeted for improvement. Led by Washington, the other states involved in overseeing the insurer’s ongoing activities are Alaska, California and Texas.
There are 13 areas in need of improvement, including:

• Agent training and oversight


• Claims handling


• Identification of company


• Transparency of the companies’ relationship with associations


• Complaints and grievances


• Cancellation, non-renewal and discontinuance notices


• Establishing and maintaining a compliance program

[Check NAIC website for more information or updates as they become available. NAIC stands for National Assn. of Insurance Commissioners. Above is from press release.]