State insurance regulators, working together through the National Association of Insurance Commissioners (NAIC), announced the details of a regulatory settlement agreement between 40 jurisdictions and Conseco, Inc., due to a pattern of consumer harm in the company’s long-term care insurance business. This multi-state investigation has resulted in a $2.3 million fine and $30 million in claims-handling improvements and restitution. “Consumers need to have confidence in the insurance products they’re buying and in the companies they’re doing business with,” said Montana State Auditor John Morrison, who chairs the NAIC Market Regulation and Consumer Affairs Committee, which oversees multi-state examinations. “As state insurance regulators, our No. 1 job is to protect consumers by making sure companies pay claims in a prompt and appropriate manner — and to take regulatory action when they fail to do so.”
The states of Florida, Illinois, Indiana, Pennsylvania and Texas led the settlement negotiations. According to the terms of the settlement, Conseco will pay a $2.3 million penalty to be shared by all participating states; pay at least $4 million in restitution and administrative costs to harmed policyholders; and invest $26 million in system upgrades and improved claims administration. Conseco is also obligated to pay an additional $10 million in fines if problems are not corrected.
“Conseco is among the nation’s largest long-term care insurers,” said Pennsylvania Acting Insurance Commissioner Joel Ario, whose department served as the lead state on the investigation. “It is vital that long-term care insurers make prompt and appropriate payment of claims to consumers who are older and whose life and well-being are dependent upon it. Conseco failed this test.”
Specifically, the on-site examination showed that:
- Investigation of pending claims were not handled in a timely manner;
- Claim files were not properly documented or maintained; and
- Time frames for company responses to claimants did not adhere to applicable regulations.
The settlement involves two Conseco subsidiaries — Conseco Senior Health Insurance Company and Bankers Life and Casualty Insurance Company — and covers claims filed from Jan. 1, 2005, through April 30, 2007.
Conseco self-reported serious issues in complaint and claims handling, and blamed the problems on the challenge of integrating various computer systems. The settlement requires the company to contract with an experienced long-term care claims administrator to process claims in a timely and appropriate manner.
According to the terms of the settlement, Conseco Senior Health Insurance Company, which is not actively writing new policies, will automatically review 1,112 claims that were initially denied; will provide notices to another 18,000 policyholders covering 49,000 claims that may have been partially denied or subsequently denied after initial payment; and will set up a toll-free call center for all claimants who believe their claim settlement was not handled properly. The investigation found that the primary problems in most cases were delays in claim payments, rather than outright claim denials.
In the case of Bankers Life and Casualty Insurance Company, which is writing new policies, the investigation uncovered inadequate marketing and sales compliance issues. The settlement requires Bankers to:
- Enhance its producer (agent) training program;
- Eliminate producer complaint thresholds, so that a single complaint can result in disciplinary action;
- Regularly review experience-period results for all producers; and
- Supervise all producers and terminate them due to non-compliance with marketing standards.
Going forward, both companies are required to:
- Revise claims-handling procedures to guarantee timely and accurate processing;
- Handle all complaints completely and in a timely fashion;
- Create a centralized complaint database; and
- Establish a countrywide contact for complaints.
State insurance regulators will conduct ongoing monitoring for appropriate compliance benchmarks for complaint and claims processing; implement quarterly reporting requirements; and, ultimately, conduct a re-examination of the companies to ensure that all problems have been corrected.
Conseco has 30 days to mail notices to policyholders on how to seek review of their claims. These notices will also include a toll-free number for all long-term care claimants.
To date, jurisdictions that have adopted the settlement agreement include: Alabama, Alaska, Arizona, Arkansas, Colorado, Delaware, District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia and Wyoming.
The Pennsylvania Insurance Department has approved the separation, effective today, of Senior Health Insurance Company of Pennsylvania (formerly Conseco Senior Health Insurance Company) from Conseco Inc. As a result of the transaction, the long-term care business of SHIP will be managed by SHIP, subject to the oversight of the Senior Health Care Oversight Trust and, for certain matters, the Department. 
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