Rhode Island doctors to recoup denied claims from censured health plan

Physicians in Rhode Island won't be doing business with a Texas-based health insurer for a while -- except to collect checks on money they're owed for past care.

The state's health insurance commissioner has ordered MEGA Life and Health Insurance to pay an estimated $2.5 million in restitution and fines and stop selling group health coverage in Rhode Island for three years, beginning in 2012.

The allegations are based on problems that surfaced in 2006, when the health insurance commissioner's office realized the company was selling to self-employed business owners under an arrangement where the member paid an association fee.

The health insurance commissioner's examiners found that MEGA was using illegal underwriting practices and improperly denying claims due to preexisting conditions in violation of regulations governing the small-group market.

MEGA, a subsidiary of HealthMarkets, based in North Richland Hills, Texas, did not deny or admit to breaking any laws. The company agreed to the terms of the order and said in a statement that it was "pleased to have this matter finally brought to a conclusion."

Among the accounts left to settle is $70,000 MEGA owes in claims.

According to the settlement terms, if a claim is less than a year old and MEGA has an assignment of benefits on file, MEGA will honor the assignment and mail payment to the physician with a written notification to the insured. If the claim is less than a year old and MEGA has no AOB on file, MEGA will mail the payment to the certificate holder. If the claim is more than a year old, MEGA will mail the payment to the insured and also notify the physician of the additional payment if there is an assignment on file.

MEGA must pay all claims by 90 days after the Oct. 11 settlement date.

The Rhode Island action is the latest of many regulatory fines and lawsuits against HealthMarkets and its subsidiaries, particularly related to its business before 2005.

HealthMarkets agreed in 2008 to pay a $20 million fine to settle allegations of misdeeds in 35 states and Washington, D.C., between 2000 and 2005. The agreement came after an investigation, led by Alaska and Washington insurance commissioners, into multiple suspected regulatory violations.

The company did not admit to or deny violating any laws. It agreed to an improvement plan to address problems with how it trained agents, handled claims, dealt with complaints and canceled coverage. HealthMarkets said it already addressed many of the problems the investigation identified.

Earlier in 2008, Mila Kofman, then Maine's insurance superintendent, fined the company $1 million for failing to meet the state's minimum medical-loss ratio from 2004 to 2007. She said at times the company spent as little as 42.6% of every premium dollar on care for members. The company denied wrongdoing but agreed to the settlement.

HealthMarkets has been privately owned by a group of investors, including affiliates of Goldman Sachs, Credit Suisse and The Blackstone Group, since 2006.