Health Plan Intermediaries Holdings has agreed to pay $2 million to resolve allegations that the company and its third-party agents knowingly marketed and sold insurance policies that they misrepresented as compliant with the Affordable Care Act, misleading consumers with limited coverage and large out-of-pocket costs, California Insurance Commissioner Ricardo Lara announced this week.
The settlement also resolves allegations that HPIH illegally raised the cost of the coverage to policyholders to cover their broker fees, among other fees. The company does not admit wrongdoing in the settlement.
"Consumers looking to purchase health insurance expect they are getting coverage to meet their medical needs, not be sold a 'bill of goods,'" Lara said in a statement. "Misrepresenting health insurance coverage puts consumers' physical, mental, and financial well-being at great risk."
The California Department of Insurance alleges that HPIH, and its agents with HPIH's knowledge, misrepresented to consumers the nature of coverage or benefits provided by the policy and other services that it packaged and sold.
The department further alleges that HPIH knowingly misrepresented policies to consumers to create the impression that the policies purchased were either a robust ACA-compliant policy or were as comprehensive as an ACA-compliant policy.
In one instance, a consumer was sold a policy represented to her as ACA-compliant and included coverage for hospitalization, according to the department's order to show cause. In fact, the policy included only limited medical benefits.
When the consumer was later hospitalized, she incurred more than $26,000 in charges and received only $300 in policy benefits, leaving her responsible for the remainder of the bill.
Another consumer bought what he believed was a broad supplementary health insurance plan when in fact he was sold a limited insurance benefit with benefit caps of $250 a day and a surgery benefit of only $1,000. The consumer required surgery and incurred uncovered out-of-pocket medical expenses exceeding $85,000.
The order further alleges that several other consumers signed up for coverage believing that they had an expansive network of physicians to choose from, prescription drug coverage, access to preventive care and coverage of preexisting conditions. None of these things were true, leaving them with substantial uncovered out-of-pocket costs.
