Virginia is among a number of states and the District of Columbia that have entered into or soon will enter into a $20 million regulatory settlement agreement with The MEGA Life and Health Insurance Company; Mid-West National Life Insurance Company of Tennessee; and The Chesapeake Life Insurance Company.

The settlement follows a multi-state examination of the companies that identified problems with their claims and complaint handling practices; agent oversight and training; and consumer disclosure. The examination, led by insurance regulators from Washington and Alaska, covered a six-year period ending December 31, 2005. The exam findings show that the companies targeted self-employed individuals and sold their health plans through associations. In some instances, the agent or the company did not adequately explain the benefits covered by the health plan.

Virginia’s portion of the settlement will be at least $337,451 and will go to the state’s Literary Fund. The entire $20-million penalty will be divided among the participating states based on the companies’ premium volume in each state.

According to the terms of the settlement, the companies must mail a notice to all policyholders with policies issued before August 1, 2005, that includes a web address, toll-free telephone number, mailing address and e-mail address where policyholders can ask questions about their coverage and benefits.

Each method of communication must be staffed by a company representative who can provide information about the policyholder’s specific plan. Each company’s website must also include a “frequently asked questions” section, company contact information, general coverage descriptions, and information on how to appeal a claim or file a grievance.

The companies must also report to a five-state examination team their progress on performance standards targeted for improvement. Improved standards include claims handling, complaint and grievance handling, and agent training and oversight. Failure to meet the performance standards could result in additional penalties of up to $10 million.

As of December 31, 2007, MEGA Life’s direct written premium in the state was $23.5 million with a .28 percent share of the health insurance market. Mid-West’s market share was .037 percent with nearly $3 million in direct written premium; and Chesapeake’s direct written premium was $491,144 with .00592 percent share of the health insurance market.

In addition to Virginia, the following jurisdictions have adopted the settlement agreement: Alabama, Alaska, Arkansas, Arizona, California, Colorado, Connecticut, District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Minnesota, Montana, North Carolina, Nebraska, Nevada, New Hampshire, New Jersey, New York, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin, Wyoming, and Guam. August 18 is the deadline for states to join the settlement.

A copy of the settlement agreement is available on the SCC website at the link below.