A $20 million national settlement has been made against HealthMarkets, Inc. and its affiliated companies, MEGA Life and Health Insurance Company, Mid-West National Life Insurance Company, and Chesapeake Life Insurance Company. The investigation was initiated in 2005 by the National Association of Insurance Commissioners (NAIC), and was supported by 30 individual states. Each state was experiencing problems with HealthMarkets and its affiliates, so they banded together to initiate a comprehensive investigation. The results of the investigation noted several critical problems, including disclosure of information, inadequate training of agents, claims handling, and complaint handling practices. According to the settlement, the insurer must implement a new customer-focused program. The terms of the program are:

• Sending a notice to all policyholders with policies issued prior to August 1, 2005. The notice must include full contact information, including a toll-free number, mailing address, and e-mail address, giving policyholders an opportunity to ask questions about their coverage. The notice must also include a website address for each company.

• Each method of communication must be staffed by a knowledgeable associate who is able to provide detailed information about specific plans.

• Websites must contain a “Frequently Asked Questions” section, general coverage descriptions, full contact information, and information on how to appeal a claim or file a complaint.

Additionally, the companies must report progress on several performance standards twice a year. The companies have been given 13 specific areas that need improvement; the top 7 are:

• Agent training and oversight

• Claims handling

• Identification of company

• Transparency of the companies’ relationships with associations

• Complaints and grievances

• Cancellation, non-renewal, and discontinuance notices

• Establishing and maintaining a compliance program

If the companies fail to meet these performance standards, they will be responsible for additional fines of up to $10 million.

The 30 states involved in the investigation include: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, District of Columbia, Florida, Hawaii, Idaho, Indiana, Kansas, Louisiana, Minnesota, Montana, North Carolina, Nebraska, New Jersey, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming. The $20 million settlement will be divided among the participating states based on the companies’ premium volume in each state.