PROVIDENCE – Ever seen those fliers on telephone poles touting “affordable” health insurance for the self-employed? It turns out the coverage wasn’t quite as it seemed – and now the company behind it is paying a $20 million fine.
The penalty against HealthMarkets Inc. and its affiliated companies, MEGA Life and Health Insurance Co., Mid-West National Life Insurance Co. and Chesapeake Life Insurance Co. is part of a settlement with 48 states, including Rhode Island, announced last week.
The fine will be divided among the states based on the companies’ premium volume in each state; Rhode Island will get an estimated $200,257, which will go into the state’s General Fund.
The deal follows a three-year investigation, sanctioned by the National Association of Insurance Commissioners (NAIC) and led by Washington state and Alaska, that found multiple problems with HealthMarkets operations, including its consumer disclosure, oversight and training of agents, claims handling and complaint handling practices, Rhode Island Health Insurance Commissioner Christopher F. Koller said in a news release.
HealthMarkets faces up to $10 million in additional penalties if it fails to meet performance standards laid out in the settlement.
The NAIC probe found HealthMarkets had targeted its sales to self-employed individuals and also sold its plans through associations such as the National Association for the Self-Employed and Americans for Financial Security.
Koller said consumers who signed up with HealthMarkets “were not properly informed about the limitations” of the coverage they got. He added: “Rhode Islanders need health insurance coverage that works – not disappears – when they are sick.”
The NAIC settlement only covers plans sold in the individual market, Koller noted. Separately, his staff is completing an examination of HealthMarkets’ marketing practices in the Rhode Island small-group market.
Under the national settlement, which went into effect on Friday, HealthMarkets and its affiliates must implement an outreach program that includes:
• Sending a notice to the holders of all policies issued before Aug. 1, 2005, with a toll-free number, mailing address and e-mail address to which they can direct questions, as well as a Web site for each company.
• Staffing each of those communication channels with someone able to provide detailed information about the policyholder’s specific plan.
• Setting up 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.
