Insurers Refund $1 Million to 11,000 Mo. Residents for Errors Discovered in State Exams

Three major insurers have completed $1 million in refunds to more than 11,000 Missouri policyholders and 39 health-care facilities for errors reportedly detected in market conduct examinations by the Department of Insurance (MDI).

“These mistakes were the type that no consumer likely would have found and brought to the attention of either the company or the department through the normal complaint process,” said Scott Lakin, the department director.

Reportedly involved were:

$334,369 that State Farm Insurance Cos. repaid to 127 policyholders or claimants. Those individuals had been injured in auto accidents, but some medical expenses were disallowed on the recommendations of an outside company, MedView, retained by State Farm. The insurer, however, could not show that a licensed physician or chiropractor had reviewed the claims before the denials were made. The practice had been the subject of a “Dateline NBC” segment.

$317,769 that Shelter Insurance Cos. repaid to 6,238 policyholders who were overcharged on their auto insurance premiums. The policyholders had paid higher premiums for comprehensive and uninsured motorist coverage because of accident and driving history, but such surcharges on auto policies are prohibited by state regulations. Comprehensive coverage protects auto owners against physical damage from vandalism and acts of God, such as weather and non-collision road hazards, that have no relationship to accident history.

$345,577 that Humana Health Plan Inc. refunded to 39 health-care providers and 4,647 policyholders in the Kansas City area. The state market conduct exam found that Humana had improperly calculated co-payments and deductibles; amounts it owed when other insurers or programs were involved; and payments by an outside mental-health contractor. The errors involved business group policyholders as well as Missouri Consolidated Health Care Plan members, who are state or local government employees.

Unlike audits of insurers’ financial conditions, the market conduct examination unit focuses on patterns of business practices, generally related to claims handling and premium calculations, that violate state laws and regulations.

Such examinations usually are targeted at insurers with large volumes of Missouri business or suspect consumer complaint records. The U.S. General Accounting Office (GAO) last month cited Missouri for having the only market conduct program in the nation based on formal analysis of insurers. (Two other states have just started similar approaches of selecting companies for market conduct exams.)

If violations are found, MDI can fine the companies and require refunds for consumers, giving them an incentive to avoid making future mistakes.

So far, in 2003, MDI’s market conduct unit has required the refund of $1.1 million to Missouri consumers.

Last year, companies examined paid $1 million for violating state insurance market conduct laws with more than $600,000 paid so far in 2003. The fines collected hold companies accountable and are used to support Missouri’s public schools.