Assurant Health overbilled small firms

Assurant Health overcharged an unspecified number of small businesses between 2002 and 2004 and will have to pay refunds to those clients, state regulators determined in an investigation of the Milwaukee-based insurance company.



The Wisconsin Office of the Commissioner of Insurance found that Assurant miscalculated rates for small employer customers and must refund each small employer group the amount it was overbilled.



It's not yet clear how many of Assurant's small employer customers, those with between two and 50 employees, had to pay higher health insurance premiums because of the miscalculations, or how far back the miscalculations stretch.



The insurance commissioner's investigation of the company -- then known as Fortis Health Insurance Co. -- pointed out potential overbillings based on a sampling of 2002 and 2003 policies. Fortis changed its name to Assurant Health in 2004.



The amount that was overbilled will be better known by early June, when Assurant must report a more detailed account of the errors to state regulators, said Susan Ezalarab, director of the insurance commissioner's Bureau of Market Regulations. Ezalarab declined to estimate how many customers were affected, or how large Assurant's reimbursement to those clients might be.



Phone calls to company officials were not returned. In a March 23 statement, the company said it is "committed to complying with all applicable Wisconsin regulations."



Millions in premiums

The company wrote more than $24 million in small group insurance premiums in 2002 in Wisconsin, according to the insurance commissioner. It wrote another $19 million in individual premiums that year, and is considered one of the larger writers nationally of health insurance policies for individuals.



Questions about overbilling arose during a state investigation of Fortis after an unusually high number of complaints were filed against the insurer in 2002 and 2003.



Investigators found that Fortis erroneously used occupation as a factor in determining small group insurance rates. State law bars insurers from considering occupation in determining those rates, although factors including age, sex and health of the group can be considered. Excluding certain factors in setting rates helps ensure more common rates and smaller rate swings for small businesses, state regulators said.



The insurance commissioner occasionally conducts "market examinations" of all insurance companies operating in Wisconsin, Ezalarab said.



State insurance regulators logged 211 complaints against Fortis between Jan. 1, 2002, and Dec. 31, 2003, according to the report.



That included 73 complaints about individual accident and health coverage in 2003 alone, or 0.38 complaints per $100,000 of written premium -- more than five times the state average of 0.07. It was the highest "complaint ratio" among individual accident and health insurers in the state during that time.



The majority of the complaints involved "claim handling issues" such as claim denials, according to the investigation. Sixty-seven complaints involved the insurer's preferred provider organization business.



The investigation report includes 45 recommendations that Assurant must follow to comply with state law. Many are minor recommendations, ranging from maintaining a more accurate database of agents to revising a brochure it gives to employer customers.



Violations a concern

The breadth of state law violations, however, was concerning, Ezalarab said.



She said there is a general "pattern" of Assurant not following Wisconsin insurance rules, and that the insurer "does not seem to have policies or procedures in place" to do so adequately.



She said Assurant's lack of compliance with state-specific rules is especially concerning given that the insurer is based in Wisconsin.



In the report, regulators ordered Assurant to devise a "compliance plan" and conduct regular audits to make sure state laws are being followed.



"They need to get a better handle on compliance," Ezalarab said.



Ezalarab said Assurant is working to increase the amount of staff dedicated to compliance issues.



She called the small employer rate miscalculation "a technical issue" and said the company told investigators that it happened following installation of a new rating software system that wrongly built occupation into the formula used to determine small group premiums.



The company is working to fix the problem, Ezalarab said.



Insurer taking action

In a letter to the insurance commissioner dated March 3, an Assurant Health official said the company would not contest the regulators' report or any of its recommendations.



Assurant "has begun remedial action for the matters identified in the report that required correction and/or better documentation to demonstrate compliance," wrote Betsy Pelovitz, director of market conduct for Assurant. "The company is committed to complying with all applicable Wisconsin laws and regulations" and will follow up with a corrective action plan by mid-May, she wrote.



Pelovitz did not return phone calls seeking additional comment.



The state will likely continue to track Assurant's progress in correcting the violations. Fines are possible if the company fails to comply, Ezalarab said.



The number of complaints surprised Jon Cyganiak, an agent with Cyganiak Planning Inc., a Brookfield agency that sells Assurant products primarily to individuals.



"I haven't had any issues with them on the individual side," he said.



Assurant has traditionally been known to charge higher premiums for its small group insurance products, Cyganiak said. Large-scale small employer rate miscalculations are rare, he said.



Assurant Health is one of four operating divisions of Assurant Inc., which comprises the U.S. insurance operations that European financial conglomerate Fortis Inc. spun off as a publicly traded company in an initial public offering in February 2004. Assurant Health's headquarters is at 501 W. Michigan St., Milwaukee.