A west coast legal firm has launched an investigation into the market conduct of Mega Life and Health Insurance Company and Mid-West National Life Insurance Company. Their parent company, HealthMarkets, Inc., is also being investigated, along with the two shareholders (Blackstone Group, L.P. and Goldman Sachs Group, Inc.) who purchased HealthMarkets in 2006 for $850 million.
This is not the first time that Mega, Mid-West and HealthMarkets have come under regulatory scrutiny. In 2003, the Colorado Division of Insurance fined Mega and Mid-West $75,000 each (see page 9 of the Colorado Regulator from the spring of 2003). Two years ago, HealthMarkets was fined $20 million, after an investigation by insurance commissioners in 29 states, including Colorado. The fine was levied for a range of misconduct, including negligence in training agents and the handling of claims. The current legal investigation goes further than simply claiming negligence though. The press release from Levetown and Jenkins, LLP states that
“Mega and Mid-West insurance agents purportedly were instructed and incentivized to induce consumers to purchase insurance policies by any means necessary, including misrepresenting and concealing important information about basic terms of the coverage being offered.”
If found to be true, this seems a bit more sinister than simple negligence in terms of agent training. Not providing adequate training is a far different matter from purposely teaching agents to misrepresent coverage and conceal policy details. We’ll see what comes of this investigation, but it’s unlikely that the law firm decided to investigate without significant reason to believe they would find evidence of misconduct. This most recent investigation states that HealthMarkets made $1.1 billion last year from the sale of their health insurance policies. Perhaps they have found that as long as their profits exceed the fines levied against them, it’s advantageous to continue business as usual.
In 2007, The Health Care Blog had a good article about connecting the dots between AHIP, Goldman Sachs, Credit Suisse and BlackStone.