2013-12-03

Markel Insurance Company To Refund $2.75 M To More Than 22,000 Students And 34 Colleges In New York; Pay A Nearly $1M Penalty

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

Attorney General Schneiderman’s office worked jointly with the Department of Financial Services to investigate and finalize today’s settlement—an investigation that was initiated in 2010 by then-Attorney General Cuomo. Under the agreement, Markel will pay more than $2.75 million in refunds to students and colleges and a combined penalty of $990,000 to the Attorney General’s Office and DFS, split evenly between the offices. Students will be eligible for a refund if they enrolled in a Markel student health insurance plan during 2007-08-to-2009-10 and 2011-12. Markel will also issue refunds to colleges for accident insurance or sports accident plans issued during those periods. Markel has stopped offering student health plans, accident insurance plans and sports accident insurance plans in New York. 

The case was handled by Assistant Attorney General Melvin Goldberg and Special Counsel Carolyn Fast of the Consumer Frauds and Protection Bureau under the supervision of Jane M. Azia, Bureau Chief of the Consumer Frauds and Protection Bureau; and Karla G. Sanchez, Executive Deputy Attorney General for Economic Justice. At DFS, the case was handled by Associate Counsel Brian Montgomery under the direction of Executive Deputy Superintendent Joy Feigenbaum of the Financial Frauds & Consumer Protection Division and Deputy Superintendent Troy Oeschner.

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

 

Groups audience: 

Consumer Frauds and Protection Bureau

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