HealthMarkets Inc. has agreed to pay at least $20 million in penalties to resolve state regulators’ concerns about subsidiaries’ health insurance sales and policy administration efforts.
The settlement agreement involves the HealthMarkets MEGA Life and Health Insurance Company, Mid-West National Life Insurance Company of Tennessee and Chesapeake Life Insurance Company subsidiaries, according to HealthMarkets, North Richland Hills, Texas.
Officials in Washington state and Alaska served as the lead regulators overseeing a 3-year multi-state exam of the HealthMarkets subsidiaries.
The exam covered a 5-year period ending Dec. 31, 2005.
The exam “stemmed from the volume, scope and nature of complaints made against the companies by consumers in many states,” according to Washington state officials.
The examiners “found multiple problems involving consumer disclosure, oversight and training of agents, claims handling, and complaint handling practices,” officials say.
In a addition to agreeing to pay a $20 million fine, HealthMarkets has agreed to pay $10 million in additional penalties if it fails to meet other terms of the settlement agreement.
The agreement requires HealthMarkets to comply with detailed marketing and training requirements.
HealthMarkets is supposed to undergo a follow-up examination by July 2010, HealthMarkets says.
HealthMarkets Chief Executive Officer Phillip Hildebrand says the company began making some of the changes before the multi-state exam began and started making other changes soon after the exam started.
“We have worked closely with insurance regulators during the multi-state examination and settlement process, and we understand our obligations to regulators, as well as our customers,” Hildebrand says in a statement.
HealthMarkets reports that someone now calls all customers after they have bought policies to ensure that the customers under the policies’ limitations.
About 99% of customers decide to keep their coverage after getting the calls, HealthMarkets says.