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