Wednesday, June 23, 2010

Cinergy In New York's Crosshairs

Cinergy, which advertises limited benefit health plans on late night television, the Internet and through telemarketers, will face a hearing where it will answer charges that it is not fit to be allowed to sell insurance in New York State.

Limited benefit health insurance plans normally provide less than comprehensive hospital/medical coverage, but with healthcare bills being the leading cause of personal bankruptcy filings nationally, many consumers searching for affordable coverage buy limited benefit health plans as one way to insure against potential liability. Limited benefit health plans may leave consumers with large medical bills. If injury or illness occurs and an insured files a claim, they may find that they have less coverage than they thought.

"Health insurance is too important to take chances with," Superintendent Wrynn said. "Consumers need to have confidence that the coverage they think they are paying for is the coverage they get. We will not allow anyone to take advantage of New Yorkers' need for affordable health insurance by using misleading marketing techniques."

At the hearing, Cinergy Health Inc., a Florida company, along with sublicensee Steven Trattner, must answer charges that they "have demonstrated untrustworthiness and/or incompetence to act as insurance producers within the meaning of section 2110(a)(4) of the Insurance Law." The company, which generated more than $26 million in 2008 marketing limited benefit and associated health plans, and Mr. Trattner will have to show cause why they should not be fined or their licenses suspended or revoked. An unlicensed company or individual would not be able to do any insurance business in New York.

The hearing is scheduled for 10 a.m. on July 29, 2010 at the New York State Insurance Department's New York City office, 25 Beaver Street.

Last year, the Department cracked down on companies selling limited benefit health insurance plans in ways that mislead people into believing they have full heath insurance coverage. The Department moved to protect New Yorkers by stopping one company from selling the product in New York and from advertising nationally and began an examination of the marketing practices of all companies selling this product.

Cinergy marketed the plan that led to the Department's crackdown, and committed multiple violations of the Insurance Law while doing so, according to the citation the Department issued to Cinergy. Major charges against Cinergy include creating and using television advertisements that were false and misleading, in that the advertisements:

• stated that the insurance covers "doctors, hospitals, accidents, pregnancy, labs, diagnosis, emergencies and surgery" and that there are "no annual limits or deductibles for surgery," when in fact there were limitations on the coverage such as a limit of $100 per visit for five doctor's visits per year. By not indicating the significant limitations in the coverage, the advertisement created the misleading impression that the limited medical benefit plan actually offered major medical or comprehensive coverage, which it did not;

• stated that "Most Pre-Existing Conditions Are Accepted," without defining or describing "pre-existing condition," and without disclosing that the policy actually had a six-month waiting period for pre-existing conditions;

• did not contain the expected benefit ratio for the policy, which is the portion of future premiums that the company expects to return as benefits;

• prominently displayed the "Cinergy Health" logo and name throughout the duration of the advertisement, while the name of the insurer providing the coverage, AMLI, the actual plan provider, was shown inconspicuously for only a few seconds; and

• failed to provide the full name of the insurer providing the coverage, together with the city in which it had its principal place of business.

Cinergy's telephone sales staff made false and misleading statements to potential enrollees regarding the nature of the coverage, the cost of the coverage and other benefits, and the identity of the entity that was actually providing the coverage, the citation says. In addition, Cinergy issued a "Member Handbook" to enrollees that contained false and misleading statements regarding the nature of the coverage, the cost of the coverage and other benefits, and the identity of the entity that was actually providing the coverage.

Cinergy was cited for numerous other violations of the Insurance Law, including compensation violations, using unapproved forms and using unlicensed agents.

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