Maine fines insurer $1 million

A health insurance company accused of overcharging its individual insurance customers in Maine has agreed to refund its current and former members their money plus interest, and to pay the Maine Bureau of Insurance $1 million.

Mega Life and Health Insurance Company, a subsidiary of HealthMarkets, which is based in North Richland Hills, Texas, did not admit any wrongdoing but agreed to a settlement reached April 3.

The Bureau of Insurance alleged that the company was using an "unacceptable" formula to calculate how much of each premium dollar was used for medical costs, Maine Superintendent of Insurance Mila Kofman said.

According to the consent order, using the correct formula would have shown that Mega Life was using as little as 42.6% of its premium on medical costs, when Maine law requires at least a 65% medical loss ratio. The company's fine is based on a $250,000 per year penalty for allegedly violating the law in the years 2004 through 2007.

Kofman said the company wrote nearly 10,000 policies during those four years. Mega Life also was required to reset its rates for 2008, she said. The company has 30 days to propose a method of refunding money to policyholders who were overcharged.

"When we first entered the individual health insurance market in 2004, our filed rates were designed to reach and exceed the required 65% minimum loss ratio," said Michael Colliflower, executive vice president and general counsel for HealthMarkets. "However, since this was a small and growing group of customers, we did not meet that threshold on an annual basis, a fact which we reported as required to the Maine Bureau. Through cooperative discussions with the Maine Bureau, we have agreed to this action to resolve this issue and move forward in a fully compliant manner."

The state's investigation did not examine the company's payments to physicians, Kofman said.

Note: This item originally appeared at http://www.ama-assn.org/amednews/2008/04/28/bibf0428.htm.