Insurer fined $2.5M for illegal underwriting practices

Using illegal underwriting practices, among other violations, has led to a $2.5 million fine imposed upon MEGA Life and Health Insurance.

According to a settlement with the Rhode Island Insurance Commissioner, MEGA's violations included denying coverage to employees who didn't meet its underwriting standards, charging employers premiums higher than allowed by state law, charging excessive membership fees, and failing to offer coverage equally to all small businesses, WPRI reports.

About 5,500 small employers that used MEGA to provide health insurance for their employees will split $2.3 million, while the state will receive $225,000, reports the Providence Business News. MEGA also is banned from operating as a health insurer in Rhode Island for the next three years.

This fine is the latest in a series of regulatory actions taken against MEGA, which is part of Texas-based HealthMarkets, over the marketing and underwriting practices of HealthMarkets insurance plans. HealthMarkets and its subsidiaries have paid more than $40 million since 2008 to settle complaints with more than 30 states, according to the Fort Worth Star-Telegram.

To learn more:
- read the insurance commissioner's press release and settlement (.pdf)
- see the WPRI article
- read the Providence Business News article
- check out the Fort Worth Star-Telegram article

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