Monday, December 23, 2013

No. 14: New York Slams Markel for Overcharging on Student Health Insurance

On December 3, 2013, the Office of the New York State Attorney General (OAG) announced a $3.75 million Assurance of Discontinuance (AOD) with Markel Insurance Company for overcharging on college student health insurance plans. The AOD resolves an investigation by OAG and the New York State Department of Financial Services (DFS) revealing that the company's student health plans, college accident plans, and sports accident plans failed to meet legal requirements for minimum loss ratios.

Markel overcharged about 22,000 students at 34 New York colleges, some of which are units of the State University of New York (SUNY). Under the AOD, the company will pay about $2.75 million in restitution to students and colleges, and a combined penalty of $990,000 equally divided between OAG and DFS. The colleges at which the estimated number of students receiving refunds exceeded 500 are Albany College of Pharmacy & Health Science (1,000), Bard College (5,800), Clarkson University (750), Colgate University (1,400), Nyack College (1,850), St. Bonaventure University (1,000), St. Lawrence University (1,150), SUNY Binghamton (2,250), SUNY Oneonta (1,497), SUNY Potsdam (600), and Wells College (1,200).

The AOD also requires Markel to end an improper commission practice. Here is one paragraph of the AOD:
In addition, Markel paid bonuses or override commissions to at least one agent, based on factors such as the loss ratio. Markel entered into broker compensation agreements that provided that it would only pay the agent a bonus if the loss ratio was kept below 60%, which is below the 65% minimum loss ratio required by 11 NYCRR 52.45(f). Such agreements create conflicts of interest for the agent because they provide financial incentives for the agent to keep loss ratios low in violation of the law and contrary to the best interest of the schools' students. As a result of such agreements, Markel has paid hundreds of thousands of dollars in improper bonuses and commissions.
Also, pursuant to the Patient Protection and Affordable Care Act of 2010 (PPACA), the federal Department of Health and Human Services (HHS) issued a regulation in March 2012 covering the applicability of PPACA to student health insurance policies. HHS regulations, effective for policy years beginning July 1, 2012, require a minimum loss ratio of 80% for student health insurance policies.

OAG alleged that Markel violated three New York statutes and regulations: a statute that "prohibits persons or business entities from engaging in repeated fraudulent or illegal acts or otherwise demonstrating persistent fraud or illegality in the carrying on, conducting or transaction of business," a statute that "prohibits deceptive acts or practices," and a regulation that "requires that group and blanket health insurance achieve a 65% minimum loss ratio." The company neither admitted nor denied the allegations.

Markel said it exited the domestic student health insurance business nationwide and did not issue any blanket student health insurance plans for the 2012-2013 policy year. The company also said it will exit the blanket student accident insurance business and the blanket student intercollegiate sports accident insurance business in New York at the end of the 2012-2013 policy year.

I have combined the OAG press release and the AOD itself into a 17-page complimentary PDF. Send me an e-mail request at for the OAG/Markel package.