Date: September 2, 2008
For more information contact: Mikaela Reck, Public Information Officer, (608) 267-9336 or mikaela.reck@wisconsin.gov

State Insurance Regulators Levy $20 Million Penalty
Against Subsidiaries of HealthMarkets, Inc.

Wisconsin to receive nearly $400,000 in settlement against health insurance companies

Madison, WI—Wisconsin Insurance Commissioner Sean Dilweg announced that Wisconsin will receive nearly $400,000 in civil penalties as part of a $20 million dollar regulatory settlement agreement between 29 jurisdictions and MEGA Life and Health Insurance Company, Mid-West National Life Insurance Company and Chesapeake Life Insurance Company, subsidiaries of HealthMarkets, Inc., now known as UICI.

"This multi-state settlement addresses allegations of serious violations of consumer protection laws," said Dilweg. "It's an excellent example of how state insurance regulators can effectively work together and address market practices occurring in multiple states."

The regulatory settlement follows a three-year multi-state examination led by the states of Washington and Alaska with assistance from the National Association of Insurance Commissioners (NAIC). The examination report alleged multiple problems involving consumer disclosure, oversight and training of agents, claims handling and complaint-handling practices. The subsidiaries of HealthMarkets face up to $10 million in additional penalties if they fail to meet performance standards outlined in the settlement.

According to the terms of the settlement, the companies must implement an outreach program that includes the following:

• Sending a notice to all existing policyholders whose medical policies were issued prior to Aug. 1, 2005, that includes a toll-free number, mailing address and e-mail address where policyholders can ask questions about their coverage. The notice also must include a Web site address for each company.
• Ensuring each method of communication is staffed by someone able to provide detailed information about the policyholder's specific plan.
• Establishing a Web site with a "frequently asked questions" section, general coverage descriptions, a listing of contact information and information on how to appeal a claim or file a grievance.

In addition, the companies must report progress twice a year through December 31, 2009, on performance standards targeted for improvement.

The settlement addresses 13 areas of the companies' operations in need of improvement, including:

• Agent training and oversight
• Claims handling
• Identification of company
• Transparency of the companies' relationship with associations
• Complaints and grievances
• Cancellation, nonrenewal and discontinuance notices
• Establishing and maintaining a compliance program

The multi-state examination was initiated as a collaborative action under a single umbrella through the NAIC because the companies were the targets of separate investigations and consumer lawsuits in several individual states.

The examination covers a five-year period ending December 31, 2005, and stemmed from the volume, scope and nature of complaints made against the companies by consumers in many states, including Wisconsin.

The examination report findings alleged the companies targeted their sales to self-employed individuals and sold the health plans through associations. MEGA agents sold policies through the National Association for the Self-Employed (NASE) and Americans for Financial Security (AFS). Mid-West agents sold plans through the Alliance for Affordable Services (AAS). The examination report also alleges that in many instances, the agent or the company did not adequately explain the benefits covered by the health plan. The companies deny the allegations in the examination report, and any violation of law, but still agreed to the settlement.

To date, 48 states, the District of Columbia, Guam and Puerto Rico have adopted the settlement agreement.

Wisconsin consumers with questions concerning insurance are encouraged to call the OCI complaints line, 1-800-236-8517. Additional tips and more information about insurance, including a link to the Insure U Web site, can be found at the OCI Web site, oci.wi.gov.

Created by the Legislature in 1871, Wisconsin's Office of the Commissioner of Insurance (OCI) was vested with broad powers to ensure that the insurance industry responsibly and adequately met the insurance needs of Wisconsin citizens. Today, OCI's mission is to lead the way in informing and protecting the public and responding to its insurance needs.