Maria Vullo (Photo: New York DFS)

Cigna Health and Life Insurance Co. was fined $2 million on Tuesday by New York’s Department of Financial Services in connection with allegations that the company violated state insurance laws.

The department found, after an investigation, that Cigna sold stop-loss insurance to small employers.

Employers that offer self-insured health plans use stop-loss to protect themselves against big claims.

New York state lets insurers sell stop-loss insurance only to large employers, officials said. New York state defines a large employer as an employer with more than 100 employees.

The New York department also found that Cigna illegally sold fully insured policies outside of the state to New York-based small groups with New York employees.

New York requires health insurers to use pure community rating. Insurers cannot charge more for older customers, or for other customers who appear to be likely to have a higher-than-average need for medical care.

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 “By deliberately choosing to write New York risks outside of New York, Cigna’s actions harmed New York’s community-rating program for small group employers,” Superintendent Maria Vullo said in a statement. “Cigna cherry-picked risks, which may have improperly induced forum shopping in the New York small-group market.”

The New York department states in its order that, from Jan. 1, 2016, through Jan. 1, 2017, Cigna violated issued 43 fully insured health insurance policies and 38 stop-loss insurance policies outside the state to evade state small group community-rating rules.

Cigna Health and Life is a New York-based subsidiary of Bloomfield, Connecticut-based Cigna Corp.

In an emailed statement, a Cigna spokesman said, “Our objective is to improve the health and health care affordability in the communities we serve. We have agreed with the New York Department of Financial Services to resolve this matter and would welcome the opportunity to work with the department and insurers in developing industry guidance regarding the scope of New York’s small group law in order to ensure a level, competitive playing field.”

The investigation by the New York department began after the department received complaints in July 2016 about Cigna selling stop-loss and fully insured health insurance policies outside of the state to New York-based small employer groups.

In the consent order, which was signed by Cigna Health and Life’s president, Julia Huggins, the department says the insurer initially agreed to stop selling of stop-loss insurance and fully insured health insurance policies outside New York, but “later resumed its practices.”

As part of the agreement, the insurance company must provide written notices to all small groups that were issued coverage through prohibited transactions by Dec. 1. Cigna must also provide the state agency with a list of the names and addresses of all small-group policyholders to whom the written notices were sent.

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