IN THE MATTER OF THE MARKET CONDUCT EXAMINATION OF THE MEGA LIFE AND HEALTH INSURANCE COMPANY, MID-WEST NATIONAL LIFE INSURANCE COMPANY OF TENNESSEE, AND THE CHESAPEAKE LIFE INSURANCE COMPANY REGULATORY SETTLEMENT AGREEMENT
THE MARKET CONDUCT EXAMINATION OF
THE MEGA LIFE AND HEALTH INSURANCE COMPANY,
MID-WEST NATIONAL LIFE INSURANCE COMPANY OF TENNESSEE, AND
THE CHESAPEAKE LIFE INSURANCE COMPANY
REGULATORY SETTLEMENT AGREEMENT
§ | The MEGA Life and Health Insurance Company (“MEGA”), | ||
§ | Mid-West National Life Insurance Company of Tennessee (“Mid-West”), and | ||
§ | The Chesapeake Life Insurance Company (“Chesapeake”). |
§ | The “Lead Regulators”, which are made up of two State regulators: |
§ | Director of the Alaska Division of Insurance, and | ||
§ | Insurance Commissioner of Washington State. |
§ | The “Domestic Regulators,” which are made up of two State regulators: |
§ | Insurance Commissioner of the State of Oklahoma, and | ||
§ | Commissioner of Insurance of the State of Texas. |
§ | The “Participating Regulators”, which are made up of the insurance regulators of each of the remaining jurisdictions that agree to approve this Agreement. |
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1 | On April 14, 2006, UICI announced that it had changed its corporate identity to HealthMarkets, Inc.. |
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o | A “frequently asked questions” section that answers relevant coverage questions, and which will be subject to an initial review by the Monitoring Regulators. | ||
o | General coverage descriptions which will provide information about any existing coverages provided by the Companies including, but not limited to, preventive care, outpatient care for illnesses and injuries, inpatient hospital care, and emergency care (including care in Urgent Care centers and emergency rooms, and ambulance coverage). | ||
o | A listing of the mailing address, email address and toll free number to contact the Company personnel described in Section F.3. of this agreement. | ||
o | Information about how to pursue the claims appeal and grievance process and contact information. |
• | Be trained to respond to these calls | ||
• | Be able to walk the insured through his or her coverage using plain language to confirm the insured’s understanding of the coverage. | ||
• | Explain insurance coverages under the insured’s existing plans. | ||
• | Offer to send the insured a complete certificate of insurance. |
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• | Provide information about any existing coverages provided by the Companies including, but not limited to, preventive care, outpatient care for illnesses and injuries, inpatient hospital care, and emergency care (including care in Urgent Care centers and emergency rooms, and ambulance coverage). |
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§ | review the Companies’ reports of their progress in implementing the Standards for Performance Measurement; | ||
§ | provide summary reports of the Companies’ progress to the Participating Regulators; | ||
§ | identify the need for additional measures if the Companies are not in compliance with this Agreement and communicate the same to the Companies in a timely manner; and | ||
§ | implement a follow-up examination of the Companies. This examination will be initiated no later than July 1, 2010. The examination shall be conducted in accordance with the then-current NAIC Market Regulation Handbook as a guideline. The purpose of the examination will be to: |
o | Assess the accuracy and validity of the Companies’ reports; | ||
o | Assess the Companies’ compliance with this Agreement, including the Standards for Performance Measurement; | ||
o | Assess the need for any possible Penalty for Failure to Perform; and, | ||
o | Conclude the terms of this Agreement and the multi-state market conduct examination of the Companies. |
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§ | This Agreement is enforceable by its terms under the applicable laws, regulations and judicial rulings in its respective jurisdiction; |
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§ | The Signatory Regulator, on behalf of his or her respective jurisdiction, has the authority to enter into this Agreement and bind that party now and in the future; and | ||
§ | The Signatory Regulator has reviewed and agrees with the terms and conditions as set forth in this Agreement. |
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§ | At the time they are delivered by hand; | ||
§ | One business day after transmission by facsimile or other electronic system (evidenced by machine generated receipt); | ||
§ | Five business days after being placed in the hands of a commercial courier service for express delivery; or | ||
§ | 10 business days after placement in the mail. All notices must be mailed as follows: |
o | Registered or certified mail with return receipt requested. | ||
o | Postage prepaid. | ||
o | Addressed to the following addresses or a party’s most current principal address of which the party sending the notice has been notified: |
Xxxx Xxxxxxxxxxx
Executive Vice President and General Counsel
0000 Xxxxxxxxx 00
Xxxxx Xxxxxxxx Xxxxx, XX 00000
000-000-0000
xxxx.xxxxxxxxxxx@xxxxxxxxxxxxx.xxx
Xxxxxx Xxxxx
Market Conduct Oversight Manager
Office of Insurance Commissioner
Insurance 5000 Building
PO Box 40259
Olympia, WA 98504-0259
000-000-0000
xxxxxxx@xxx.xx.xxx
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BY:
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DATE | |||||
SIGNATURE | ||||||
ITS: |
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PRINTED TITLE |
I,
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, hereby affirm that I am the | of | ||||||
PRINTED NAME | PRINTED TITLE |
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BY:
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DATE | |||||||
SIGNATURE | ||||||||
ITS: |
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PRINTED TITLE |
I,
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, hereby affirm that I am the | of | ||||||
PRINTED NAME | PRINTED TITLE |
BY:
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DATE | |||||||
SIGNATURE | ||||||||
ITS: |
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PRINTED TITLE |
I,
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, hereby affirm that I am the | of | ||||||
PRINTED NAME | PRINTED TITLE |
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WASHINGTON STATE OFFICE OF THE INSURANCE COMMISSIONER | ||||
BY:
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DATE | |||
Xxxx Xxxxxxxx, Insurance Commissioner of Washington State |
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ALASKA DIVISION OF INSURANCE | ||||
BY:
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DATE | |||
Xxxxx X. Xxxx, | ||||
Director, Alaska Division of Insurance |
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THE MEGA LIFE AND HEALTH INSURANCE COMPANY,
MIDWEST NATIONAL LIFE INSURANCE COMPANY OF TENNESSEE, AND
THE CHESAPEAKE LIFE INSURANCE COMPANY
REGULATORY SETTLEMENT AGREEMENT
[NAME OF INSURANCE REGULATORY AGENCY] | ||||
BY:
|
DATE | |||
SIGNATURE | ||||
PRINTED NAME OF REGULATORY OFFICIAL | ||||
PRINTED TITLE |
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MONETARY PENALTY AND ALLOCATION TO SIGNATORY STATES
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Required Action | Performance Standard | Tolerance | ||||||
1. HEALTH INSURANCE AGENT TRAINING |
||||||||
Standard 1.A.1 | ||||||||
The Companies must modify their agency
program to expand
and improve agent
training,
particularly for
new agents, by
expanding theirs
training program to
include industry
knowledge, ethics,
product
presentation,
proper disclosures,
consistent delivery
across agencies,
and a robust
structure, among
|
• | The Companies have a written curriculum for new agents, which is standardized so that each agent receives the training as defined in 1.A.2. | Pass/Fail | |||||
other enhancements; | Standard 1.A.2 | |||||||
Standard curriculum for new agent training includes: | ||||||||
To ensure agents and consumers
thoroughly
understand the
products they are
selling/buying and
appropriate
disclosures are
made at the point
of sale and in
follow-up contacts,
the Company must: |
• • • • • • • • |
Information specific to applicable states or
U.S. territories; Overview of the health insurance industry; Basics of health insurance policies; Sales presentation standards; Fundamentals of health insurance policy provisions, including statements of coverage, deductibles, co-pays, co-insurance, exclusions, and cancellation; Business Ethics; Legal requirements regarding disclosures, application completion, and signatures; and Legal and ethical requirements for truth and fair dealing in sales of health insurance. |
||||||
1.A: Strengthen the training program for new agents by including health insurance industry information. |
||||||||
Pass/Fail | ||||||||
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Required Action | Performance Standard | Tolerance | ||
Standard 1.A.3. | ||||
The Companies do not appoint recruits as agents until they have passed the Companies’ Training, Testing, Audit, Complaints, and Compliance (“TTACC”) testing and met state licensing requirements. TTACC, as used in these Standards for Performance Measurement, means the program as described in the Report and in the Companies’ Response to the Report, as well as subsequent modifications made to meet the provisions of this Agreement. | Pass/Fail | |||
1.B: Provide agent
training more
frequently based
upon average agent
retention
statistics, such as
every three to six
months rather than
annually
|
Standard 1.B.1 The Companies offer product training three times per calendar year at each division office. |
Pass/Fail | ||
Standard 1.B.2 For the remainder of the calendar year in which an agent initially passes TTACC testing, each agent is required to attend up to three additional training sessions to be chosen from those offered by his or her Division Office. |
10% |
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Required Action | Performance Standard | Tolerance | ||
Standard 1.B.3 For every full calendar year after the year in which an agent initially passes TTACC testing, the Companies require all agents to attend at least three training sessions including at least one product training and one compliance/ethics training annually. |
10% | |||
1.C: Develop a
standard but
progressive
curriculum for
agents based upon
experience level
with the Company.
|
Standard 1.C.1 The Companies provide access to an on-line manual for each state and product set which agents are able to review at any time. The Companies provide timely communications regarding changes in underwriting processes, product clarifications, compliance updates, changes in forms and process to the division offices. |
Pass/Fail | ||
Standard 1.C.2 The Companies require all agents to pass annual testing (based on the agent’s TTACC anniversary date) in order to retain their appointments. This testing is updated to reflect new information implemented since their most recent TTACC testing. |
10% | |||
1.D: Strengthen the training program for existing agents, particularly product information, ethics and point of sale presentations. | Standard 1.D.1 |
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The agent training curriculum includes: | ||||||||||
• | Business Ethics and Legal Requirements; | |||||||||
o | Legal requirements regarding disclosures, application completion, and signatures; | Pass/Fail | ||||||||
o | Legal and ethical requirements for truth and fair dealing in sales of health insurance; | |||||||||
• | Point of Sale (“POS”) Training including the following topics: |
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Required Action | Performance Standard | Tolerance | ||||||||
o | Complete and accurate information about the Companies’ product portfolio and variety of riders; | |||||||||
o | Current presentation aids (brochures, visual aids, scripts, etc.) for use in educating Customers about and selling the Companies’ products; | |||||||||
o | Appropriate techniques for POS presentations to special populations (including the elderly, disabled, and non- or limited-English speaking persons); | |||||||||
o | Tools available to educate Customers about their products and resources available for assisting Customers with questions or problems which the agents are unable to resolve, including the local state insurance department; and | |||||||||
o | How to contact the Companies’ Agent Outreach department, a subset of the Companies’ Customer Service representatives dedicated to agent support. | |||||||||
• | New products and the related POS materials | |||||||||
o | Information on how a claim would be processed for each product, including | |||||||||
§ Limitations of products; and | ||||||||||
§ Stop-loss for Customers, where applicable. | ||||||||||
• | Complaint-handling procedures and support | |||||||||
Standard 1.D.2 |
||||||||||
The training program is reviewed at least annually and updated as needed. Updates are made more frequently if applicable laws or the Companies’ procedures require. | Pass/Fail |
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Required Action | Performance Standard | Tolerance | ||
Standard 1.D.3 | ||||
Agents are required to pass testing on each product before the agents may sell that product. | 10% | |||
Standard 1.D.4 | ||||
Inappropriately submitted applications are rejected and not underwritten. | 10% | |||
Standard 1.D.5 | ||||
Trainees are asked to provide written or on-line evaluations of the training programs and the trainer(s). | Pass/Fail | |||
Standard 1.D.6 | ||||
The Companies have a Code of Ethics and Professional Responsibility for agents. | Pass/Fail | |||
Standard 1.D.7 | ||||
As part of the agent appointment process, and thereafter each calendar year, the Companies require that all agents acknowledge in writing or electronically that they have read and agreed to abide by the Code of Ethics and Professional Responsibility for agents. | 10% |
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Required Action | Performance Standard | Tolerance | ||
1.E: Develop
centralized
standards and
controls to manage
agents and train
agency management
in appropriate
controls and
monitoring of agent
and agency
activities. Develop
tools and metrics
for measuring the
effectiveness of
training (e.g.
reduction of
complaints,
reductions un
cancellations,
etc.)
|
Standard 1.E.1 Annually, the Companies’ Compliance, Sales, Training, and Operations departments evaluate the Companies’ agent training program for course content (including new legislative or regulatory mandates), delivery and testing medium, and other feedback or information available to the Companies (including from trainee evaluations, complaints, field management, or Customer surveys); and thereafter, recommends improvements to the program. |
Pass/Fail | ||
Standard 1.E.2 | ||||
A team of Senior management, including the Companies’ Sales; Training; and Operations departments and the Chief Compliance Officer (“CCO”) meet quarterly to discuss agent testing results and other feedback available to the Companies (including complaints or Customer survey information). This team recommends changes as a result of the feedback. | Pass/Fail | |||
Standard 1.E.3 | ||||
Appropriate departments within the Companies assess the recommendations from Senior management, provide feedback to Senior management, and implement the recommendations, as appropriate. | Pass/Fail | |||
Standard 1.E.4 | ||||
The Companies require that Field Leaders pass TTACC testing at a 90% level, holding them to a higher standard than the rest of the field force. | Pass/Fail |
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Required Action | Performance Standard | Tolerance | ||
Standard 1.E.5 | ||||
The Companies require that trainers, including Field Leaders involved in training, are instructed on how to train by August 1, 2009. The Companies provide constructive written feedback to the trainers. Thereafter, Companies require that new Field Leaders who are involved in training are instructed on how to train within 60 days of their promotion to Field Leader. | 10% | |||
Standard 1.E.6 | ||||
The Companies have a plan and a schedule to provide annual refresher instruction on training techniques. | Pass/Fail | |||
Standard 1.E.7 | ||||
Each calendar year, the Companies require that trainers, including Field Leaders involved in training, receive refresher instruction on training techniques. | 10% | |||
Standard 1.F.1 The Companies review Customer complaints and Benefit Confirmation Program (“BCP”) data at least quarterly to determine whether Customers understand the provisions of their policies, and to recommend necessary changes to agent training and point of sale materials. |
Pass/Fail |
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Required Action | Performance Standard | Tolerance | ||||
Standard 1.F.2 | ||||||
For currently marketed products, the Companies implement revisions to agent training, Customer care representative training, and point of sale materials within 90 days of the recommendations discussed in Standard 1.F.1. Customer care representatives are the Companies’ home office staff who communicate with or otherwise respond to communications received from Customers. | ||||||
In those instances where the revisions require regulatory or other external approval, system modifications or involve other dependencies: | Pass/Fail | |||||
• | The Companies have submitted a draft implementation program to the Monitoring Regulators regarding a reasonable timetable to implement these revisions. | |||||
• | The Companies have used all reasonable efforts to achieve agreement with the Monitoring Regulators on an implementation schedule. |
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Required Action | Performance Standard | Tolerance | ||||
Standard 1.F.3
For non-currently marketed products, the Companies revise Customer care representative training within 90 days of the recommendations discussed in Standard 1.F.1. In those instances where the revisions require regulatory or other external approval, systems modifications or involve other dependencies: |
Pass/Fail | |||||
• The Companies have submitted a draft
implementation
program to the Monitoring Regulators regarding a reasonable
timetable to implement these revisions. |
||||||
• The Companies have used all reasonable
efforts to
achieve agreement with the Monitoring Regulators on an
implementation schedule. |
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1.G: Train BCP
Staff to be
assertive in
reviewing coverage
with clients to
ensure more calls
are successfully
completed.
|
Standard 1.G.1
The Companies utilize a standard, written BCP training program with content that is consistent with agent training on currently marketed products and new products. |
Pass/Fail | ||||
Standard 1.G.2 By August 1, 2008, the Companies train BCP representatives regarding use of listening and questioning techniques in order to assess the Customer’s level of understanding regarding currently marketed products and their features, and have incorporated listening and questioning techniques into new hire and annual refresher training. |
10 | % |
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Required Action | Performance Standard | Tolerance | ||||
2. AGENT OVERSIGHT |
||||||
To provide adequate
monitoring of
agents and agent
activities, the
Company must:
2.A: Implement quality assurance procedures over agent activities including monitoring procedures and periodic audits. |
Standard 2.A.1
The Companies have trained field leadership on the use and functionality of the Agency Management System (AMS) by August 1, 2009. • Thereafter, Companies require
supplemental training
based on upgrades to AMS within 60 days of the upgrade
installation.
• The Companies require promoted
Field Leaders to
complete training within 60 days of promotion.
|
10 |
% |
|||
Standard 2.A.2
The Companies utilize AMS, including: |
Pass/Fail | |||||
• Use of the system to monitor
agent performance based
on the severity and volume of each agent’s complaints; and |
||||||
• Use of the system by Field Leaders
to monitor, mentor,
and provide additional coaching to the agents. |
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Standard 2.A.3
The Companies utilize AMS data to review and act on inappropriate sales practices via the Sales Practices Review Team (“SPRT”) or a successor committee which meets at least 10 times per year. |
Pass/Fail | |||||
Standard 2.A.4
Proven serious agent misconduct is dealt with expeditiously when known to the Companies. |
Pass/Fail |
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Required Action | Performance Standard | Tolerance | ||||
2.B: Enhance the
effectiveness of
agent training by
requiring monitored
testing and
monitoring the
delivery of the
training
presentations by
field managers.
|
Standard 2.B.1
The Companies test their agents in a monitored and proctored environment in field offices under the supervision of the Division Leader or designee to ensure that no notes, brochures or other reference materials are available to the agent. The test is conducted on-line and is initiated by the monitoring Division Leader or designee. |
10 |
% |
|||
Standard 2.B.2
The testing program is designed to demonstrate the agents’ ability to: • Answer Customers’ most
frequently asked questions;
|
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• Explain what is covered by the policy; |
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• Explain what is excluded from the policy; |
||||||
• Outline the types of expenses
the Customer can expect
to pay out of pocket (deductible, co-insurance, co-pays,
etc.); |
||||||
• Describe the Customer population(s)
for whom this
product is appropriate; |
Pass/Fail | |||||
• Describe the Customer population(s)
for whom this
product is NOT appropriate; |
||||||
• Describe the relationship
between the Companies and
the association and whether association membership is required
for purchase or maintenance of coverage under the product; and |
||||||
• Know the Companies’ requirements
for a point-of-sale
presentation of this product (for example, leaving a detailed
product brochure with the Customer, use of the association
disclosure form). |
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Required Action | Performance Standard | Tolerance | ||||
Standard 2.B.3
The Companies conduct annual in-person reviews of the Field Leaders’ presentations of health insurance agent training as part of the TTACC audit program. |
10 |
% |
||||
2.C: Implement a
plan to monitor
agents’ actions
using tools such as
comprehensive field
audits, phone
interviews with
recent customers,
secret shoppers and
trending of agent
and agency related
information such as
complaint
statistics,
cancellations,
product upgrades
and the like.
|
Standard 2.C.1
As part of the BCP program, the Companies attempt to contact all new medical product Customers within 90 days of the sale regarding their coverage and their POS experience. |
Pass/Fail |
||||
Standard 2.C.2
When issues relating to agent conduct are identified through the BCP calls, those agent issues are investigated by the Companies. |
10 |
% |
||||
Standard 2.C.3
The Companies use AMS to monitor agent actions in the specific areas of |
Pass/Fail |
|||||
• Business submitted; |
||||||
• Complaints activity; and |
||||||
• Taken rate (percentage of
declines, incompletes, and
cancellations of total business submitted). |
||||||
Standard 2.C.4
Procedures are in place for appropriate response to problems identified through the agent monitoring program, including retraining, discipline, or termination of the agent or field leadership, as appropriate. |
Pass/Fail |
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Required Action | Performance Standard | Tolerance | ||||
Standard 2.C.5
As problems are identified through the agent monitoring program, they are resolved, as appropriate, including retraining, discipline, or termination of the agent or field leadership. |
10 |
% |
||||
Standard 2.C.6
The Companies review logged complaints quarterly to determine trends such as misunderstandings about product features, processing concerns, benefit dissatisfaction, and failure of agents to provide sufficient information to Customers. |
Pass/Fail |
|||||
Standard 2.C.7
If negative indications or trends are identified as the result of the quarterly review of logged complaints or trends, the Companies take action to resolve the indicated problem(s). |
Pass/Fail |
|||||
Standard 2.C.8
The Companies review quarterly the results of Customer surveys and recommend and implement changes to training, products, or processes as appropriate. |
Pass/Fail |
|||||
2.D: Provide
additional point of
sale materials such
as scripts and
checklists for
agents’ use and
ensure that all
materials include
appropriate
disclosures.
|
Standard 2.D.1
The Companies’ Compliance, Product Development and Sales departments have developed POS materials and disclosures to support products currently offered to Customers. |
Pass/Fail |
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Required Action | Performance Standard | Tolerance | ||||
Standard 2.D.2
POS materials are reviewed at least annually to assess whether the materials continue to be appropriate and whether they include appropriate disclosures. |
Pass/Fail |
|||||
Standard 2.D.3
The Companies document any revisions made to POS materials, as well as whether POS materials have been discontinued. |
Pass/Fail |
|||||
2.E: Investigate
all agents with
unusual trend
statistics and all
complaints
regarding claims
alleging that
agents
misrepresented the
product at the
point of sale. Any
agent found to be
misrepresenting the
products at the
point of sale
should be
retrained,
disciplined or
dismissed as
appropriate for the
circumstances.
|
Standard 2.E.1
The Companies utilize AMS data to review and act on inappropriate sales practices via SPRT or a successor committee which meets at least 10 times per year. |
Pass/Fail |
||||
Standard 2.E.2
Proven serious agent misconduct is dealt with expeditiously when known to the Companies. |
Pass/Fail |
|||||
Standard 2.E.3
All complaints clearly alleging agent misrepresentation of the product at the point of sale are investigated. |
Pass/Fail |
|||||
Standard 2.E.4
Those agents investigated per Standard 2.E.2 and 2.E.3, and found to be misrepresenting products at the point of sale are retrained or disciplined as appropriate up to, and including, dismissal. |
Pass/Fail |
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Required Action | Performance Standard | Tolerance | ||||
2.F: Hold field
management, such as
regional managers
and above,
accountable for the
actions of each
agent under their
supervision. Field
management
performance
assessment and
overall
compensation should
contain a component
that is tied to
such performance
measures as the
number of
complaints received
about sales
practices in the
manager’s
territory, the
number of
cancellations and
persistency of
business written by
the manager and his
agents, and other
actions that may be
indicators of the
overall performance
of that manager’s
territory.
Incentives should also be developed
which reward
regional managers
who demonstrate
effective
accountability and
management of their
agents with respect
to compliance
requirements and
performance.
|
Standard 2.F.1
The Companies annually evaluate Field Leaders based upon TTACC audit results and the performance of agents within their respective territories. Performance measurements include: |
|||||
• Complaint activity;
• Taken rates; and,
• Risk associated with agent debt.
These measurement standards identify Field Leaders requiring additional oversight, as well as those demonstrating effective accountability and performance. |
Pass/Fail |
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Required Action | Standard | Tolerance | ||||
3. CLAIMS HANDLING |
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Standard 3.A.1 | ||||||
3.A: The Company must
identify and re-adjudicate
any claims for which
diagnosis and CPT codes were
altered because of the risk
that the claim may not have
been paid correctly as a
result of the code change.
The Company must cease to
alter diagnosis and CPT
codes submitted by providers
on claims.
|
The Companies have identified claims in the claims sample selected as part of the Multi-State exam for which diagnosis and CPT codes were refined by the Companies which could have resulted in improper claims adjudication outcomes. These claims were assessed to determine whether any improper claims adjudications outcomes resulted from the refinement of diagnosis and CPT codes, and were re-adjudicated based on this assessment, as appropriate. |
10 |
% |
|||
Standard 3.A.2
The Companies do not allow diagnosis or CPT codes submitted by providers on claims to be altered by Company personnel. |
Pass/Fail |
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Required Action | Standard | Tolerance | ||
3.B: The Company must
make changes to the
claims adjudication
system that will allow
them to enter an entire
claim into their system
as a single claim.
|
Standard 3.B.1 For business not yet set up on or migrated to a new claims adjudication system as described in Standard 3.B.2, the Companies’ claims adjudication system allows an entire claim to be tracked and counted as a single claim unit for each bill submitted and processed in the system, and the Companies require that each claim is handled under a single claim identifier (“film number”). |
Pass/Fail |
||
Standard 3.B.2 As of 12/31/2009, the Companies enter claims for any products set up on a new claims adjudication system as a unique single claim unit for each bill submitted and process in the system under a single claim number. |
Pass/Fail |
|||
3.C: All claims must be
adjudicated in a timely
manner as required by
statute or rule in the
appropriate jurisdiction
based on claim
submission location. All
delayed claims letters
must include a reason
for the delay. The
Company’s practice of
pending claims while
waiting for information
on other claims must
cease.
|
Standard 3.C.1 All claims are adjudicated in a timely manner as required by statute or rule in the appropriate jurisdiction (including the tolerances provided in those statutes or rules) based upon claim submission location. Where no tolerance standards are promulgated in a particular jurisdiction, the NAIC Market Regulation Handbook tolerance standard of 7% applies. |
Pass/Fail |
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Required Action | Standard | Tolerance | ||||
Standard 3.C.2 All delayed claim letters include the reason(s) for the delay and information needed to complete processing. |
7 |
% |
||||
Standard 3.C.3 The Companies do not allow personnel to pend claims while waiting for information on other unrelated claims. Each claim submission is handled separately. |
7 |
% |
||||
Standard 3.D.1 All EOB forms include the deductible information pertinent to the claim. |
7 |
% |
||||
3.E: The Company must
perform independent
routine and ongoing
audits of claims to
determine adherence with
the Claims Procedures
Manual and applicable
laws and regulations.
The results of such
audits must be analyzed
by compliance personnel
to identify trends and
root causes of claim
mishandling, areas for
training emphasis, and
problem claim adjusters.
Audits must result in
action by the Company to
correct those areas
found to be problematic
or deficient.
|
Standard 3.E.1 The Companies perform routine and ongoing audits of claims to determine adherence with the Claims Procedures Manual and applicable laws and regulations. These audits are conducted by claims department personnel independent of the claims adjudication unit. • The auditing program is such that each claims handler
has at least one of his or her claims audited monthly.
|
10 |
% |
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Required Action | Standard | Tolerance | ||
Standard 3.E.2 The Companies’ claims department audits are consistent across Companies and the auditing program is evaluated and updated on an ongoing basis and at least annually. |
Pass/Fail |
|||
Standard 3.E.3 The results of the audits are analyzed quarterly by appropriate supervisory or senior personnel to identify trends and root causes of claim mishandling, areas for training emphasis, and problem claims adjusters. |
||||
The Companies can demonstrate that procedures are in place and
followed for appropriate response to problems identified through
the claims handling audit program, including retraining,
discipline, or dismissal of claims handlers, as appropriate. The Companies can demonstrate follow-through on any identified need for change from identification to action and resolution. Such follow-through includes assessment of each change. |
Pass/Fail | |||
Standard 3.E.4 The claims department’s auditing program includes random selection and auditing of paid, pending and denied claims. The number of claims sampled is consistent with the requirements of the NAIC Market Regulation Handbook. |
Pass/Fail |
Page 44
Required Action | Standard | Tolerance | ||
4. CLAIMS PROCEDURES MANUAL |
||||
The
Company will develop and maintain a Claims Procedures Manual. |
Standard 4.1 |
|||
The Companies maintain a current Claims Procedures Manual. | Pass/Fail | |||
Standard 4.2 |
||||
The Companies are able to demonstrate that the Claims Procedures Manual is evaluated and updated as appropriate, and at a minimum annually. | ||||
Pass/Fail | ||||
5. IDENTIFICATION OF COMPANY |
||||
5.A:
All claims should be
adjudicated under the Company in which the claim is being made. |
Standard 5.A.1 |
|||
All claims are adjudicated under the Company in which the claim is being made. | 7% |
Page 45
Required Action | Standard | Tolerance | ||||
5.B: Anytime a claim is
denied, appropriate
notification must be
sent.
|
Standard 5.B.1 Each Customer is notified any time a claim is denied. This includes situations where a Customer has coverage under more than one of the Companies, and a Company believes that the Customer’s claim may more appropriately or successfully be made to another of the Companies. In that situation, the Companies ensure that this information is clearly explained to the Customer and correctly documented by the Company (or Companies) to which the claim is being made. |
7 |
% |
|||
5.C: All claims must be
documented correctly by
being filed with the
Company in which the
claim is being made.
|
Standard 5.C.1 The Companies do not allow Company personnel to process a claim under a different company or policy than that under which the claim has been made without direct, clear explanation to the Customer and compliance with the above requirements. |
7 |
% |
Page 46
Required Action | Standard | Tolerance | ||||
Standard 5.C.2 Documentation in each Company’s file is such that a reviewer can determine from the documentation: |
||||||
• The actions taken by the Company with regard to a claim; |
||||||
• The status of the claim related to that Company; and |
||||||
• If a Company has denied and closed a claim because
coverage exists under the Customer’s policy with another of the
Companies, a reviewer can tell from the first company’s
documentation which Company’s records to search to find
subsequent developments on the claim.
|
7 | % | ||||
6. TRANSPARENT RELATIONSHIPS WITH ASSOCIATIONS |
||||||
The Company must
provide sufficient
transparency
information based on
the complexity of the
Company’s relationship
with the associations
and its own affiliates.
This includes:
|
Standard 6.A.1 The Companies require that insurance payments and association payments are received as two separate payments. |
|||||
6.A: The Company must
change its procedures so
that the insurance
payments and the
association
payments are received as
two separate payments.
The Company must
identify states in which
the definition of
premium includes all
amounts collected by the
insurer, and must advise
those states of the
possibility that the
Company may need to
amend premium tax
filings. The Company
must work with the
affected regulatory
jurisdictions to correct
prior year filing
errors.
|
10 | % |
Page 47
Required Action | Standard | Tolerance | ||||
Standard 6.A.2 The Companies are able to demonstrate that they have identified each state in which the definition of premium includes all amounts collected by the insurer and advised those states whether the Companies need to amend their premium tax filings. The Companies can demonstrate follow-through with each applicable state. |
Pass/Fail |
|||||
6.B: The Company must
disclose, with emphasis
and clarity, to
consumers and
policyholders the
relationship between the
Company and any
associations it uses for
marketing products.
|
Standard 6.B.1 The Companies disclose to Customers the relationship between each Company and each association the Company utilizes for marketing products. |
10 |
% |
|||
6.C: The Company needs
to clearly disclose to
regulators how the
Policy Fees and the
association New Member
Admin Fees are allocated
between the insurance
company and the
associations. This will
assist the Company in
providing to the
regulators an accurate
accounting for premium
tax purposes and for the
proper accounting for
premium refunds to
insureds.
|
Standard 6.C.1 The Companies record as revenue the policy fees collected on which they correspondingly pay premium tax. The Companies do not record as revenue fees payable to the association. |
10 |
% |
|||
Standard 6.C.2 The Companies properly calculate and account for premium refunds to Customers according to applicable Company policies, laws, rules, and regulations. |
10 |
% |
Page 48
Required Action | Standard | Tolerance | ||||
6.D: The Company needs
to remain vigilant that
its relationships with
all entities are cost
effective and do not
adversely impact the
cost of insurance to
consumers/policyholders.
|
Standard 6.D.1 The Companies evaluate the associations through which they sell products on an annual basis to assess whether the reputation of the association , the fees charged and the services offered make it an appropriate avenue for selling the Companies’ products. |
Pass/Fail |
||||
7. COMPLAINTS AND GRIEVANCES |
||||||
For complaints and
grievances to be handled
appropriately, the
Company must take the
following actions:
|
Standard 7.A.1 All complaints, written and verbal, are recorded and logged in compliance with applicable state laws and the Companies’ procedures. |
10 |
% |
|||
7.A: All complaints
must be recorded and
logged correctly in
compliance with states’
laws and the Company’s
stated procedure. |
||||||
7.B: The Company must
ensure that all issues
raised in a
complaint/grievance are
acknowledged and
investigated,
finalized/disposed of in
accordance with rules
and regulations,
applicable statutes and
contract language.
|
Standard 7.B.1 All issues raised in a complaint or grievance, written or verbal, are acknowledged, investigated and finalized / disposed of according to applicable contract language, statutes, rules and regulations. |
10 |
% |
|||
7.C: The Company must
comply with the
timeliness of response
and timeliness of
resolution of each
complaint/grievance as
required by applicable
statutes, rules and
regulations.
|
Standard 7.C.1 All complaints and grievances, written or verbal, are handled in compliance with applicable statutes, rules, and regulations for timely responses and resolutions. |
10 |
% |
Page 49
Required Action | Standard | Tolerance | ||||
7.D: The Company must
identify those
jurisdictions that have
statutes or regulations
defining a grievance.
|
Standard 7.D.1 The Companies have identified those jurisdictions that have statutes or regulations defining a “grievance” and maintain state-specific procedures for staff when handling grievances. |
Pass/Fail |
||||
1. The
Company must train
appropriate
personnel to
identify
grievances upon
receipt. |
||||||
2. The
Company must develop
procedures for
staff to follow
when handling
grievances. These
procedures must be
state specific. |
||||||
Standard 7.D.2 The Companies can demonstrate that all appropriate staff is trained to identify grievances upon receipt. |
10 |
% |
||||
Standard 7.D.3 The Companies have written procedures in place for all appropriate staff to follow when handling grievances. These procedures are consistent with state-specific statutes, rules, and regulations governing grievances. |
Pass/Fail |
|||||
7.E: The Company must
request an agent
statement for all
complaints involving an
agent’s actions.
|
Standard 7.E.1 The Companies’ procedures require that an agent’s statement must be requested for all complaints and grievances involving an agent’s actions. |
10 |
% |
|||
7.F: The Company must
improve its complaint
handling controls and
establish strong
oversight of the
complaint handling
process by:
|
Standard 7.F.1 The Companies have prepared a report to regulators outlining their complaint-related business practice reforms. The report includes documentation to evidence and support the adequacy of such reforms. |
Pass/Fail |
||||
1.
Preparation of a report
to regulators which
outlines the
complaint-related
business practice
reforms the
Company has
implemented to
date |
Page 50
Required Action | Standard | Tolerance | ||||
which address
the many concerns
expressed in
complaints.
Included with the
report should be
documentation to
evidence and
support the
adequacy of such
reforms. This
report can be used
by regulators in
developing a work
plan for a
follow-up
examination.
|
Standard 7.F.2 The Complaint Action Team (or successor committee) maintains a tracking log for identified issues. The Companies have established procedures to ensure that there is ownership and accountability and procedures to monitor and ensure appropriate follow-through. |
Pass/Fail |
||||
2. Creation
of a tracking log for
issues forwarded
to the Complaint
Action Team and
establishing a
procedure to
ensure that there
is ownership and
accountability for
the process. |
||||||
8. CANCELLATION, NON-RENEWAL AND DISCONTINUANCE NOTICES |
||||||
Cancellation,
non-renewal and
discontinuance notices
must be handled
consistently for all
policies and must comply
with policy provisions
and state laws. This
includes information
about the availability
of a grace period
provided to the insured
and other parties to the
contract.
|
Standard 8.1 Cancellation, non-renewal and discontinuance notices are handled consistently for all policies and payment methods. |
10 |
% |
|||
Standard 8.2 The Companies’ practices regarding cancellation, non-renewal and discontinuance notices are compliant with policy provisions and state laws. |
10 |
% |
||||
Standard 8.3 Notification about the availability of a grace period for payment of premiums is consistent across all certificate holders. |
10 |
% |
Page 51
Required Action | Standard | Tolerance | ||
9. COMPLIANCE PROGRAM |
||||
Standard 9.1 The Companies’ Chief Compliance Officer manages a team of professionals which is charged with the responsibility for providing compliance guidance to the managers, employees and agents of the Companies, including the following: • Research and communicate regarding new laws and
regulations, including mandates, applicable to the business of
the Companies;
• Participate as an advisor to the committees and work
groups throughout the Companies;
• Develop internal policies and procedures when
appropriate and maintain them as necessary to comply with
current regulatory requirements;
• Advise Senior Management regarding compliance risks The Compliance team will have oversight responsibilities for all compliance related activities throughout the Companies, including: |
||||
• Oversee a complaints unit to monitor timely and thorough
responses and follow through on common issues or trends; |
||||
• Oversee a special investigations unit regarding fraud,
waste, and abuse; |
||||
• Oversee market conduct examination activities; |
Page 52
Required Action | Standard | Tolerance | ||
• Serve as Compliance liaison to external regulatory
bodies; and |
||||
• oversee advertising. |
||||
Standard 9.2 The Companies’ compliance program is judged by the Standards for Performance Measurement as set forth in this Attachment C and has been independently evaluated at periodic intervals. |
Pass/Fail |
|||
Standard 9.3 The Companies inform regulators concerning the program enhancements and changes to their compliance procedures via the semi-annual reports outlined in the Regulatory Settlement Agreement. |
Pass/Fail |
|||
10. SEPARATE FINANCIAL INFORMATION FOR PDA AND SDA |
||||
The Company should
prepare separate
financial information
of PDA and SDA on an
annual basis and have
it available to
domestic regulators
upon request.
|
Standard 10.1 Financial information for HealthMarkets’ wholly-owned subsidiaries Performance Driven Awards, Inc. (“PDA”) and Success Driven Awards, Inc. (“SDA”) is prepared, separate from the parent entity, and is available to domestic regulators upon request. |
Pass/Fail |
Page 53
Required Action | Standard | Tolerance | ||
11. ACCOUNTING SUPPORT FOR TREATMENT OF AGENTS’ STOCK BENEFIT MATCH |
||||
The Company should
provide to regulators
authoritative accounting
support for its
treatment of the agent’s
stock benefit match.
|
Standard 11.1 SDA and PDA, which are non-owned affiliates of the Companies, account for the stock matching benefit program. The accounting for the stock matching benefit paid to agents and field service representatives for the respective associations under the agent stock plan complies with generally accepted accounting principles. |
Pass/Fail |
||
12. PROVIDING REQUESTED COPY OF OUTSIDE CONSULTING REPORT |
||||
The Company must
provide a copy of the
consultant’s report or
an overview of the
report for review by
the regulators.
|
Standard 12.1 The Companies have provided the Examiners with an overview of the outside consultant’s report. |
Pass/Fail |
||
13. REPORT TO REGULATORS OUTLINING ALL CHANGES |
||||
The Company must prepare
a report to regulators
outlining precisely by
examination area all
business reforms,
improvements and changes
to policies and
procedures implemented
through current date.
|
Standard 13.1 The Companies have prepared the report to regulators outlining changes, as requested. |
Pass/Fail |
Page 54
Page 55
Period Covered | Due Date | |
July 1, 2008 through December 31, 2008
|
February 14, 2009 | |
January 1, 2009 through June 30, 2009
|
August 14, 2009 | |
July 1, 2009 through December 31, 2009
|
February 14, 2010 |
• | The Required Action as described and set forth in Attachment C of this Agreement. | ||
• | Each Performance Standard as set forth in Attachment C of this Agreement. | ||
• | The Tolerance Level as set forth in Attachment C of this Agreement. | ||
• | The Status of the each Performance Standard as set forth in Attachment C of this Agreement. |
Page 56
• | Company Comments about the current status of the Performance Standard as set forth in Attachment C of this Agreement. | ||
• | A list of the Evidence to support the Status of the Performance Standard as set forth in Attachment C of this Agreement. |
Page 57
Weighted Percentage of | ||||
Required Action | Penalty | |||
Agent Training |
25 | % | ||
Agent Oversight |
25 | % | ||
Claims Handling |
8 | % | ||
Claims Procedures Manual |
8 | % | ||
Identification of Company |
2 | % | ||
Transparent Relationships with Associations |
10 | % | ||
Complaints And Grievances |
10 | % | ||
Cancellation, Non — Renewal And Discontinuance Notices |
2 | % | ||
Compliance Program |
4 | % | ||
Separate Financial Information For PDA & SDA |
2 | % | ||
Accounting Support for Treatment of Agents’ Stock Benefit Match |
2 | % | ||
Providing Requested Copy of Outside Consulting Report |
1 | % | ||
Report to Regulators Outlining All Changes |
1 | % |
Page 58
Page 59
Name
Address
8 a.m. to 5 p.m., Monday through Friday at (000) 000-0000.
Page 60