UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK CITY (NAIC # 70106)

Transcription

1 MARKET CONDUCT EXAMINATION REPORT OF THE LIFE INSURANCE BUSINESS OF UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK CITY (NAIC # 70106) 70 Pine Street New York, NY Report No. MCLH E Examination Period: October 1, September 30, 2010 IL INSURANCE ADMINISTRATION STATE OF MARYLAND MARYLAND INSURANCE ADMINISTRATION ELIZABETH SAMMIS, ACTING COMMISSIONER MAY 18, 2011

2 MARTIN O MALLEY Governor ANTHONY G. BROWN Lt. Governor MARYLAND INSURANCE ADMINISTRATION BETH SAMMIS Acting Commissioner KAREN STAKEM HORNIG Deputy Commissioner NANCY GRODIN Associate Commissioner Compliance & Enforcement 200 St. Paul Place, Suite 2700, Baltimore, Maryland Direct Dial: Fax: ngrodin@mdinsurance.state.md.us TTY: May 18, 2011 The Honorable Elizabeth Sammis Acting Commissioner of Insurance State of Maryland 200 St. Paul Place, Suite 2700 Baltimore, Maryland Dear Commissioner Sammis: Pursuant to your instructions and authorization, an examination has been made of the market conduct affairs of: UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK whose home Office is located at 70 Pine Street, New York, New York The report of such Examination is being respectfully submitted. Sincerely, signature on file with original Nancy Grodin, ssociate Commissioner Compliance and Enforcement

3 MARYLAND INSURANCE ADMINISTRATION MAY 18, 2011 TABLE OF CONTENTS SECTION PAGE I. EXECUTIVE SUMMARY 1 II. SCOPE OF EXAMINATION 2 III. COMPANY PROFILE 3 IV. DISCLOSURE REQUIREMENTS 4 V. RECOMMENDATIONS 5 VI. EXAMINATION REPORT SUBMISSION 6 United States Life Insurance Company in the City of New York MCLH E

4 MARYLAND INSURANCE ADMINISTRATION MAY 18, 2011 I. EXECUTIVE SUMMARY The Maryland Insurance Administration (hereinafter MIA ) conducted a targeted Market Conduct Examination of the out-of-state association health benefit plans of United States Life Insurance Company in the City of New York (hereinafter Company ). The focus of the Examination was to review the Company s business practices as they relate to providing the required disclosures to Maryland residents when they apply for a health benefit plan offered by an out-of-state association. The Company provided the following items for review along with the required Certificate of Compliance: Specimen copies of each certificate of insurance issued to members for each association. Specimen copies of enrollment applications provided to members for enrollment into each health benefit plan. A written statement that the Company does not collect association membership fees or dues on behalf of any association. The MIA reviewed the documentation submitted by the Company and found five violations of (c) of the Insurance Article. A more precise description of the violations is noted herein. United States Life Insurance Company in the City of New York - MCLH E

5 MARYLAND INSURANCE ADMINISTRATION MAY 18, 2011 II. SCOPE OF EXAMINATION A target Market Conduct Examination ( Examination ) has been performed on the Company and a Report thereon is submitted as follows: The Examination was conducted pursuant to the statutory authority granted under ~2-205, 2-207, 2-208, and ofthe Insurance Article and COMAR The period covered by the examination was October 1, 2009 through September 30, The purpose of the examination was to assess the Company s compliance with of the Insurance Article. All unacceptable or non-compliant practices may not have been discovered or noted in the report. Failure to identify or criticize improper or non-compliant business practices in Maryland or other jurisdictions does not constitute acceptance of such practices. United States Life Insurance Company in the City of New York - MCLH E 2

6 MARYLAND INSURANCE ADMINISTRATION MAY 18, 2011 III. COMPANY PROFILE The United States Life Insurance Company in the City of New York (USLIFE) is a wholly-owned subsidiary of AGC Life Insurance Company. USL primarily markets universal life, level term life, whole life, annuities and group products. The company s group product portfolio includes life, ad&d, dental, vision, disability income and supplemental a&h coverages. 1 AM. Best Company AMB Credit Report Insurance Professional for United States Life Insurance Company in the City of New York, History and Business Review, copied for this report on 2/16/2011. United States Life Insurance Company in the City of New York - MCLH E 3

7 MARYLAND INSURANCE ADMINISTRATION MAY 18, 2011 IV. DISCLOSURE REQUIREMENTS Issue I -Violation of.~ (c)(2), (3), (5), (6) and (7) of the Insurance Article. The Company failed to provide five of the eight required disclosures to Maryland residents applying for coverage under an out-of-state association contract. Section , titled Out-of-state association contract, provides in pertinent part: FINDING I (c) Disclosures. * A carrier shall disclose to a Maryland resident applying for coverage under an out-of-state association contract (2) all costs related to joining and maintaining membership in the association; (3) that membership fees or dues are in addition to the premium for coverage under the out-of-state associaflon contract; * (5) the mandated benefits required under Subtitle 8 of this title that are not included in the out of-state association contract; (6) that the Maryland resident may purchase an individual health benefit plan that includes the mandated benefits under Subtitle 8 of this title that are not included in the out-of-state association contract from a carrier licensed and authorized to do business in the State; (7) that benefits offered under the out-of-state association contract are not regulated by the Commissioner; and The Company failed to provide five of the eight disclosures to Maryland residents applying for coverage under an out-of-state-association contract for twelve association health benefit plans as required by (c) of the Insurance Article. The Company shall update its procedures to include providing the required disclosures to Maryland enrollees of out-of-state association health benefit plans. United States Life Insurance Company in the City of New York - MCLH E 4

8 MARYLAND INSURANCE ADMINISTRATION MAY 18, 2011 V. RECOMMENDATIONS Following an initial review of the Company s out-of-state association contracts, the MIA requested the Company to verify whether or not all plans were medically underwritten for member acceptance of coverage. The Company s response indicated that eight out of 13 plans were not medically underwritten. After further review, the MIA found contradictory language within the Company s contracts and enrollment applications, including the use of an attestation statement, requiring member applicants to attest to not having certain medical conditions. In response to MIA Quer~)#3, the Company stated, For those plans which were guaranteed issue (i.e. not medically underwritten), it is the Company s practice to use attestation statements in the enrollment. The Company later clarified its response by reconfirming that plans are in fact medically underwritten and a declination of application would occur as a result of blood and urine specimens, an attending physician s statements, a review by medical underwriting personnel, or when a member applicant declares to having one of the stated conditions in the attestation. Additionally, coverage could be rescinded based upon the results of an investigation conducted by the Company for member applicants who submit the attestation with no medical conditions affirmed but a subsequent claim later reveals otherwise. A final review determined that only one association health benefit plan was not medically underwritten. The MIA recommends that the Company familiarize themselves with the definition of medical underwriting so it can better differentiate those policies applicable to medical underwriting standards in the future. It is also recommended that the Company make any necessary updates to its system for accuracy in tracking/reporting medically underwritten policies versus those which are guaranteed issue. United States Life Insurance Company in the City of New York - MCLH E 5

9 MARYLAND INSURANCE ADMINISTRATION MAY 18, 2011 VI. EXAMINATION REPORT SUBMISSION The courtesy and cooperation extended to the examiners by the Company s officers and employees during the course of the examination are gratefully acknowledged. signature on file with original Mary Mcf~jsland,Life & Health Chief Examiner Compliance & Enforcement Unit In addition, the following individuals participated in this examination and in the preparation of this report. John Hyde, MCM Senior Market Conduct Examiner Compliance & Enforcement Unit Shelton Matthew Frazier Examiner -In-Charge Compliance & Enforcement Unit Nicole Rasinski, MCM Market Conduct Examiner Compliance & Enforcement Unit kristen A. Walter Market Conduct Associate Compliance & Enforcement Unit United States Life Insurance Company in the City of New York - MCLH E 6

10 IN THE MATTER OF THE MARYLAND INSURANCE COMMISSIONER * BEFORE THE STATE OF MARYLAND * INSURANCE COMMISSIONER V. * * UNITED STATES LIFE insurance * COMPANY IN THE CITY OF NEW YORK * CASE NO. MIA (NAIC#70106) * 70 PINE STREET NEW YORK, NEW YORK * 05/16/il 7~45~i180lf~5274 fl * $5000 ~00 CHEC1< $~50O0 00 CONSENT ORDER The Maryland Insurance Commissioner ( Commissioner ) and United States Life Insurance Company in the City of New York ( Respondent ), pursuant to ~2-108, 2-204, and of the Insurance Article, Md. Code Ann., (the Insurance Article ), and any other appucable sections, enter into this Consent Order ( Order ) as follows: EXPLANATORY STATEMENT AND FINDINGS OF FACT 1. At all times relevant to this Order, Respondent has held and currently holds a certificate of authority from the Maryland Insurance Administration ( Administration ) to operate as an insurer. 2. The Administration conducted a Market Conduct Examination ( Examination ) of Respondent. 3. Respondent admits to the facts and accepts the Administration s conclusions as stated in Examination Report number MCLH O-E ( Report ), but denies liability to any third party as a result of the violations noted in this Report. Both Respondent and the Administration agree to the conditions of the Order and the remedial measures set forth herein. Respondent executes this Order knowingly and voluntarily. The parties { DOC I) Form approved for legal sufficiency ~2.8.1O

11 acknowledge that this Order is in the public interest and both parties desire to resolve this matter without further proceedings. 4. The Examination the details of which are included in the Report, incorporated herein as if set forth in full, concluded that Respondent violated the following Maryland Law, Section (c)(2), (3), (5), (6) and (7) of the Insurance Article WHEREFORE, pursuant to ~2-108 and (d)(1) of the Insurance Article, it is hereby ORDERED by the Commissioner and consented to by Respondent: A. Respondent shall accept the Report as final and waives any right to a hearing on or for judicial review of the Report... B. Respondent shall correct the violation(s) as noted in the Report within ninety (90) days of the date this Order is executed by the Acting Insurance Commissioner or her designee. Respondent shall set forth in a letter to the Commissioner that the violation has been successfully corrected. Such letter shall be accompanied by a certification, signed by an officer of the Respondent, certifying that the information is true and accurate. C. Respondent shall pay an administrative penalty to the State of Maryland for the violations stated herein in the amount of five thousand dollars (~5,000.00) contemporaneously with Respondent s execution of this Order. Administrative penalties shall be made payable to the. Maryland Insurance Administration and shall identify the case by number or name. Unpaid penalties will be referred to the Central Collection Unit for collections.. -2-

12 D. The executed Order and payment of the administrative penalty shall be sent to the attention of: Associate Commissioner, Compliance and Enforcement, 200 St. Paul - Place, Suite 2700, Baltimore, MD E. Respondent agrees that no amounts paid pursuant to Paragraph C of this Order shall be included in or recoverable as expense.s in any rate filing filed with the Administration or any other regulatory authority. F. For the purposes ofthe Administration and for any subsequent administrative or civil proceedings concerning Respondent, whether related or. unrelated to the foregoing paragraphs, and with regard to requests for information about the Respondent made under the Maryland Public Infoçmation Act, or properly made by governmental agencies, this Order will be kept and maintained in the regular course of business by the Administration. For the purposes Of the business of the Administration, the records and publications of the Administration will, reflect this Order. G.. The parties agree that this Order resolves all matters relating to the Report only, and the factual assertions and agreements contained herein are to be used solely for the purposes of this proceeding. brought by or on behalf of the Administration. Nothing herein shall. be deemed a waiver of the Commissioner s right to proceed in an administrative action or civil action for violations not specifically identified in this Order, including., but not limited to, specific consumer complaints received by the Administration, nor shall anything herein be deemed a waiver of the right of the Respondent to contest other proceedings by the Administration. Additionally, Respondent understands and agrees that this Order addresses and resolves only the administrative actions by the Compliance and Enforcement Section of the Administration relating to the Report. This Order shall not be construed to resolve or preclude any potential or pendin~ civil, -3-

13 administrative, or criminal action or prosecution by any other person, entity or governmental authority, including but not limited to the Insurance Fraud Division of the Administration, regarding any conduct by the Respondent including the conduct that is the subject of this Order. H. Respondent has had the opportunity to have this Order reviewed by legal counsel of its choosing, and is aware of the benefits gained and obligations incurred by the execution of the Order. Respondent waives any and all rights to any hearing or judicial review ofthis Order to which it would otherwise be entitled under the Insurance Article with respect to any of the determinations made or actions ordered by this Order. I. This Order contains the entire agreement between the parties relating to the administrative actions addressed herein. This Order supersedes any and all earlier agreements or negotiations, whether oral or written. All time frames set forth in this Order may be amended or modified only by subsequent written agreement of the parties...i: On behalf of Respondent, the undersigned representative of Respondent affirms that he or she has taken all necessary steps to obtain the authority to bind Respondent to the obligations stated herein and does in fact have the authority to bind Respondent to the obligations stated -herein. K. This Order shall be effective upon signing by the Commissioner or her designee, and is a Final Order of the Commissioner under of the Insurance Article. L. Failure tq comply with the terms of this Order may subject Respondent to further legal andlor administrative action. -4-

14 It is so ORDERED, this /1 day of h1t~y.,, ELIZABETH SAMMIS ACTING INSURANCE COMMISSIONER signature on file with original By: Nancy Grodin, Associate Commissioner Compliance &.Enforcernent RESPONDENT S CONSENT RESPONDENT hereby CONSENTS to the representations made in, and to the terms of, the above Consent Order. The undersigned hereby represents that he or she has the authority to bind United States Life Insurance Company in the City of New York to the term s of this Consent Order resolving Report number MCLH E. - Name: ~ ~ Signature: signature on file with original Title: ~(L ~ f Date: ~ ~L ~,~O/f -5-