Health Insurer faces major fine

By HOWARD FISCHER

Capitol Media Services

12/10/2004



PHOENIX -- The Arizona Department of Insurance has slapped a major insurer with a hefty fine, at least in part because it was ignoring the needs of small businesses.

Erin Klug, publicist for the state agency, said the $105,000 civil penalty levied against Connecticut General Life Insurance Co. is not the largest ever. But she said it comes close.



And she said the size of the penalty is an indicator of the Insurance Department's belief that the violations found by its examiners are serious.



"It's not common for use to impose a fine of over $100,000,'' she said.

Jeff Terrill, a company vice president, agreed to the findings of fact by the Insurance Department and consented to the fine.



The penalty stems from a market conduct examination of Connecticut General for a one year period ending June 30, 2002.



Klug said many of the problems identified by the state have since been corrected. But she said the company, which provides health insurance to about 500,000 Arizonans directly and through its affiliates, has been given until the middle of February to come up with assurances that all the shortcomings have been fixed.



One of the key issues, she said, deals with the company's failure to make group health insurance available to small businesses -- those defined as from two to 50 employees.

"One of the major features of Arizona health insurance law is if you want to offer insurance to large corporations you have to offer to small groups, too,'' said Klug.



State Insurance Director Christina Urias, said this statutory provision is critical.

"Many small employers have a difficult time finding affordable health insurance for their employees,'' she said. Urias said the requirement helps ensure "maximum competition'' in the small group health insurance market.



"It's problematic when a large insurer, such as Connecticut General Life, doesn't play by the same rules required of everyone else,'' Urias said.



She said that one result of the market conduct examination is that the company now offers at least three "guaranteed issue'' policies to small groups in Arizona.

Klug said examiners also found Connecticut General out of compliance with another Arizona law which allows the employers -- and not the insurer -- to determine who is eligible to participate in group insurance.



"A lot of employers are not aware that they get to choose the employee criteria,'' she said.

For example, she said, a company may decide that anyone working at least 10 hours a week is entitled to get insurance. Klug said insurers are not free to impose their own conditions.

Klug said this employer-chosen option is something that appears to be unique to Arizona.

Examiners also found instances where Connecticut General failed to adequately inform policyholders of their rights to appeal when the company refused to provide coverage.

For example, the company did not provide telephone and mail notice to an insured along with the option to immediately seek an expedited appeal.



"Arizona insurance consumers have some of the broadest health care appeals rights in the country,'' said Urias. "But in order for the appeals process to be effective, insurers must adhere to strict notification requirements, and Connecticut General failed to do so.''

The state also found that the company issued a group disability policy that required services to be rendered by a particular hospital or person, something not permitted by a regular health insurer.



Gwyn Dilday, the company's regional public relations director, said the company is "taking appropriate steps to assure current and future compliance'' with the problems identified in the examination.