Massachusetts Attorney General Martha Coakley says her office has settled a lawsuit against a health insurance company and several subsidiaries.
The $17 million agreement is believed to be the largest consumer protection settlement against a health plan in Massachusetts history, according to Coakley’s office.
The lawsuit charged HealthMarkets Inc., North Richland Hills, Texas, and subsidiaries MEGA Life and Health Insurance and Mid-West National Life Insurance with unfair and deceptive practices in marketing and administering limited-benefit health plans sold to small businesses and individuals in the state.
The carriers targeted the self-employed along with small business owners in Massachusetts with products packaged as part of memberships in the National Association for the Self Employed, Washington; Americans for Financial Security, Irving, Texas; and the Alliance for Affordable Services, Dallas, according to Coakley.
“These companies used unfair and deceptive marketing and other practices to convince Massachusetts residents to buy health plans with limited benefits,” Coakley said in a statement. “Massachusetts health care consumers must be fairly told what they are buying, and their premium dollars should be used predominantly to pay health care benefits and not inflated commissions, overhead and profits.”
Under the terms of the consent judgment filed Monday in Suffolk Superior Court in Massachusetts, the companies will pay more than $17 million in consumer relief, penalties and costs.
In addition, the companies will be banned for at least 5 years from selling their health plans in Massachusetts and are required to exit the health plan business completely in the state. They are allowed to renew existing health plans with individuals and small businesses through 2012, while giving current policyholders time to obtain other coverage if they wish to do so.
The settlement further bars a number of unfair and deceptive acts and practices that were subjects of the lawsuit, including deceptive advertising, predatory sales practices, failing to provide health benefits required under state law, disclosing consumers’ personal information to third parties, and illegally requiring individuals and small businesses to join associations to gain access to health plans.
The insurers cooperated with her office in reaching the settlement, Coakley said.