NY fines Markel for excess premiums

Health insurers in New York are on notice with the anti-corruption-oriented governor’s office.

Markel Insurance Co. must refund more than $2.75 million to New York state students and colleges, and pay a $990,000 penalty under a settlement with both the New York State Attorney General and the Department of Financial Services (DFS). 

The settlement resolves a joint investigation by the two agencies into Markel’s alleged practice of overcharging college students on their health plans. Specifically, according to the investigation, Markel’s student health insurance plans, college accident insurance plans and sports accident insurance plans failed to meet legal requirements for minimum loss ratios.

The investigation also revealed that Markel paid improper broker bonuses, which the agencies alleged created an incentive for the broker to keep loss ratios below the legal minimum.

It is the New York State insurance law that requires that health insurance plans maintain a minimum loss ratio of 65 percent or as agents know, at least 65 cents on medical care for every dollar of premium.

However, for policy years 2007-08 to 2009-10 and again in 2011, Markel’s student health plans and college accident insurance plans and sports accident insurance plans paid out far less in claims than was required to meet the 65 percent loss ratio standard, leading to overcharges.

The investigation revealed that Markel entered into broker compensation agreements with at least one broker that provided the broker a bonus paid by Markel if the plan’s loss ratio was kept below 60 percent. Such agreements create conflicts of interest for the broker and financial incentives for brokers to break New York law, according to the DFS.

Under the settlement, Markel will pay more than $2.75 million in restitution to New York students and colleges and a $990,000 combined penalty to the Attorney General’s office and DFS, split evenly.