Filed Under:Health Insurance, Individual Health

NY fines Markel for excess premiums

State law loss ratio minimums not met, settlement alleges

New York health, finance cops: DFS' Lawsky, left, then special assistant to former AG and now Gov. Cuomo. (AP Photo/Craig Ruttle)
New York health, finance cops: DFS' Lawsky, left, then special assistant to former AG and now Gov. Cuomo. (AP Photo/Craig Ruttle)

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. 

The company is also mandated to end its improper commission practice.

Attorney General Eric Schneiderman stated that the settlement “sends a clear message: Insurance companies, like everyone else, must play by the rules and work together with government to bring down the cost of healthcare.”

New York Superintendent Benjamin Lawskysuperintendent of Financial Services, said, “Governor (Andrew) Cuomo and his administration are committed to making sure insurers follow the law and treat consumers fairly. Running up the health insurance bills of students and parents trying to make ends meet is objectionable, and simply will not be tolerated.”

Regulators were troubled because the Markel plans corned the student health market — that is they were promoted and endorsed by the colleges where they were offered, and at some colleges, students were actually required to enroll in Markel’s health insurance plan unless they could show that they had comparable coverage through a parent’s insurance or from an employer.

Markel did not return a call for comment by press time but appears to have stipulated to the settlement.

The AG’s office worked jointly with the DFS in an investigation that was initiated in 2010 by then-Attorney General Cuomo. This is not the first time that the AG’s office has worked with the DFS on a health insurance enforcement action. 

Last year, Schneiderman announced a $3.1 million settlement with Excellus Bluecross Blueshield requiring the insurer to refund plan members who overpaid health care providers as a result of Excellus's allegedly improper accounting of deductibles. Excellus had simultaneously entered into a stipulated agreement with the New York State Department of Financial Services relating to the same subject matter.

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