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Cigna agrees to multi-state disability claim settlement

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Three insurance company units of Cigna Corp. (NYSE:CI) have agreed to set aside about $79 million to resolve state regulators’ concerns about disability insurance claim handling practices.

The units — Life Insurance Company of North America, Connecticut General Life Insurance Company, and Cigna Health and Life Insurance Company — have negotiated the settlement agreement with the insurance regulators in California, Connecticut, Maine, Massachusetts and Pennsylvania.

Cigna will make $29 million available for claims that are still open, $48 million for reserves that could be used to pay for additional benefits in the future, and $1.675 million for fees and fines, officials said.

In addition to agreeing to set aside cash, Cigna has agreed to change its claim procedures to give more weight to Social Security Disability Insurance (SSDI) benefits awards, improve the way it gets medical information, set new guidelines for use of outside medical resources, use a new process to choose independent medical examiners, and accept new quality monitoring procedures, according to a copy of the settlement agreement posted on the Web.

Cigna talked about the charges in the “regulatory matters” section in a financial report it filed recently with the U.S. Securities and Exchange Commission (SEC).

Cigna said in a statement that it is a “customer-centric company with a focus on providing responsive service and timely and accurate claims handling for all of our long-term disability customers.”

Cigna has responded to changes in state disability claims procedures by more than doubling its clinical staff, hiring additional claim managers and expanding its training and audit programs, the company said.

“This regulatory settlement agreement grew out of a normal cycle of review by state regulators,” the company said. “As part of the settlement we are voluntarily agreeing to review an isolated subset of past long-term disability claim files from 2009 and 2010 (also from 2008 in California only) under updated standards.”

Cigna is collaborating with state regulatory agencies in a way that will help LTD claim handling practices and improve LTD customer service, the company said.

Maine insurance regulators said in a market conduct examination report posted on the Web that they evaluated Cigna long-term disability (LTD) insurance claim handling practices by asking to see the files for all 78 LTD claims closed, litigated or appealed for Maine residents in 2008 and 2009. Regulators looked at 18 of the 69 closed claims and all nine of the nine litigated and appealed claims.

Examiners found that some denial and termination letters were inconsistent with LTD policy standards, and that some denials and terminations were based solely on reviews by nurse case managers, without enough use of other resources.

In some cases, the companies seemed to make selective use of medical reports or evaluations, and, in some cases, the companies seemed to offer very low benefit amounts to force the claimants to litigate, officials said.

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