The New York State Department of Financial Services (“DFS”) has fined Cigna Health and Life Insurance Company $2 million for violations of New York State Insurance Law involving what the DFS said was the illegal sale of stop-loss insurance and unapproved health insurance policies that otherwise would have been part of New York's small-group market.
Stop-loss insurance may be sold only to large group employers that self-fund underlying medical expenses in order to mitigate liability for losses that result from an unexpected amount of claims. In a consent order entered into with Cigna, the DFS found that Cigna had improperly sold stop-loss and fully insured health insurance policies outside of New York to New York-based small groups with employees in New York State, and where, in many cases, the companies solicited business and conducted other activity in the state.
“By deliberately choosing to write New York risks outside of New York, Cigna's actions harmed New York's community-rating program for small group employers,” the DFS superintendent, Maria T. Vullo, said in a statement. “Cigna cherry-picked risks, which may have improperly induced forum shopping in the New York small-group market. DFS will continue to protect New York consumers and take appropriate enforcement action against any company that engages in unfair trade practices to undermine New York's health insurance market.”
After receiving complaints about Cigna's practices, the DFS requested that Cigna immediately cease selling the illegal stop-loss policies pending a DFS inquiry. The DFS said that the company initially agreed but later resumed selling the policies in question. The DFS said that it also became aware that Cigna was issuing fully insured health insurance coverage outside of New York to New York-based small groups based on the fact that those small groups were incorporated outside of New York but where, in many cases, the companies' solicitation and other activity occurred in New York.
Cigna, based in Connecticut, is licensed as a life insurance company in New York and is authorized to write life, accident, and health insurance in New York, including stop-loss insurance. Cigna does not have fully insured health insurance coverage products approved to sell to small groups in New York.
A targeted examination by the DFS found that Cigna sold 81 group health insurance policies in violation of New York Insurance Law, including 38 stop-loss insurance policies to New York small groups seeking to self-insure and 43 fully insured health insurance policies to small groups as if they were selling to non-New York small groups.
Learn more: Consent Order.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].