New York State’s Department of Insurance has fined American Medical and Life Insurance Company $700,000, alleging it had misled consumers in selling a limited-benefit health plan.

The state also banned the company from selling the plans in the state and told it to stop broadcasting a national TV commercial for the plan.

The state Department of Insurance is also examining the marketing practices of all companies selling limited-benefit health products, according to a statement from the office of Gov. David A. Patterson.

AMLI misled buyers of its limited health insurance into thinking they were getting full coverage, according to the Patterson.

“If they get seriously ill, consumers who buy this product can find themselves with huge bills they are unable to pay,” the governor alleged.

According to the state insurance department, AMLI, New York, has agreed to discontinue selling limited benefit group medical policies in the state, convert terminated group policies to individual policies upon request and to resolve customer complaints. The company has also consented to retain an independent counsel to review its operations and make specific recommendations for changes and prepare a compliance monitoring plan, according to the department.

The allegations involved limited medical benefit plan sold from fall 2006 through fall 2008.

John F. Ollis, president and CEO of AMLI, issued a statement maintaining that his company had on its own initiative brought deceptive marketing practices to the attention of the state’s Insurance Department.

AMLI “has been fully cooperating with [the department] since 2008, when we became aware of the unapproved marketing actions of a marketing entity with whom we no longer do business,” Ollis stated. “We have taken substantial measures to protect the interests of those persons who purchased insurance and rely on the value of the product they purchased and to prevent the recurrence of such unapproved activity in the future. We have discussed those measures with the New York Department of Insurance and have agreed to the referenced settlement in order to focus our attention on providing a product valued and approved by regulators and valued and fully understood by consumers.”

The state DOI also announced it is considering new regulations to assure consumers are informed about limited-benefit health insurance plan restrictions. The agency is asking insurance companies that sell such plans to provide it with information about any limited-benefit plans they sell in the state.

The department has scheduled hearings on such plans for Sept. 21 in New York City, Sept. 24 in Newburgh and Sept. 30 in Rochester.