AG Schneiderman reaches $2.75M settlement for college students

By WBNG News

AG Schneiderman reaches $2.75M settlement for college students

December 3, 2013 Updated Dec 3, 2013 at 3:17 PM EDT

New York Attorney General Eric T. Schneiderman and Department of Financial Services Superintendent Benjamin M. Lawsky on Tuesday announced a settlement with Markel Insurance Company, resolving an investigation into Markel’s practice of overcharging college students on their health plans.

According to a news release from Schneiderman's office:

A joint investigation by the Attorney General’s Office and the New York State Department of Financial Services (DFS) revealed that Markel’s student health insurance plans, college accident insurance plans and sports accident insurance plans failed to meet legal requirements for minimum “loss ratios,” leading to nearly $3 million in overcharges to roughly New York 22,000 students, including many across State University of New York campuses. The investigation also revealed that Markel paid improper broker bonuses, which created an incentive for the broker to keep loss ratios below the legal minimum.

Under the settlement, Markel will pay more than $2.75 million in restitution to New York students and colleges and a $990,000 combined penalty to the Attorney General’s Office and DFS, split evenly. The company is also mandated to end its improper commission practice.

“With the high cost of college already straining family finances across New York, students and parents shouldn’t have to worry about paying even more for health insurance,” Attorney General Schneiderman said. “This settlement sends a clear message: Insurance companies, like everyone else, must play by the rules and work together with government to bring down the cost of healthcare.”

Benjamin M. Lawsky, Superintendent of Financial Services, said, “Governor Cuomo and his Administration are committed to making sure insurers follow the law and treat consumers fairly. Running up the health insurance bills of students and parents trying to make ends meet is objectionable, and simply will not be tolerated.”

To prevent overcharges to consumers, New York State insurance regulations require that health insurance plans maintain a minimum “loss ratio” of 65%. A loss ratio is the ratio of the amount paid out in claims under a plan compared to the premium charged under that plan, and requires health insurance plans to pay at least 65 cents on medical care for every dollar of premium.
For policy years 2007-08 to 2009-10 and again in 2011, Markel’s student health plans and college accident insurance plans and sports accident insurance plans paid out far less in claims than was required to meet the 65% loss ratio standard, leading to overcharges.

Markel’s overcharges to students were especially troubling because many students had little or no choice but to enroll in the health plans. The Markel plans were promoted and endorsed by the colleges where they were offered, and at some colleges, students were actually required to enroll in Markel’s health insurance plan unless they could show that they had comparable coverage through a parent’s insurance or from an employer.

In addition, the investigation revealed that Markel entered into broker compensation agreements with at least one broker that provided that Markel would only pay the broker a bonus if the plan’s loss ratio was kept below 60%. Such agreements create conflicts of interest for the broker and financial incentives for brokers to break New York law.


The colleges where students were overcharged are:

Market Restitution by Campus    Location/County    Estimated # of Students Receiving Refunds

Albany College of Pharmacy & Health Science    Albany    1000
Allaince Theological Seminary    Rockland    140
Bard College    Dutchess    5800
Cazenovia College    Madison    150
Clarkson University    St. Lawrence    750
Colgate Rochester Crozer Divinity School    Monroe    30
Colgate University    Madison    1400
Corning Community College    Steuben    200
Elmira College    Chemung    316
Erie Community College    Erie    120
Finger Lake Community College    Ontario    15
Graduate College of Union University    Schenectady    42
Herkimer County Community College    Herkimer    30
Houghton-Alumni    Allegany    1
Jamestown Community College    Chautauqua    75
Jefferson Community College    Jefferson    40
Monroe Community College    Monroe    375
Nazareth College of Rochester    Monroe    100
Niagara County Community College    Niagara    220
Niagara University    Niagara    130
Nyack College    Rockland    1850
Roberts Wesleyan College    Monroe    450
St. Bonaventure University    Cattaraugus    1000
St. Lawrence University    St. Lawrence    1150
SUNY Fredonia    Chautauqua    66
SUNY Binghamton    Broome    2250
SUNY College of Technology at Alfred    Allegany    400
SUNY Geneseo    Livingston    150
SUNY Institute of Technology at Utica/Rome    Oneida    463
SUNY Oneonta    Otsego    1497
SUNY Potsdam    St. Lawrence    600
Trocaire College    Erie    10
Union College    Schenectady    411
Wells College    Cayuga    1200
     Estimate of Total Number of Students Receiving Refunds    22,431
     Average Refund/Student                        $107

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