N.Y. Fines Limited Health Insurer, Blocks Advertising

Acting New York Insurance Superintendent Kermitt J. Brooks fined a health insurer $700,000 for allegedly using misleading advertising to overpromise and underdeliver coverage that left patients with large bills to pay. Brooks also ordered the company to stop running television ads promising "peace of mind" for $5 a day.

The Department of Insurance took action against American Medical & Life Insurance Co. for what it said were numerous violations and a nationwide television commercial, the company's main marketing tool, that "made grossly exaggerated promises," the department charged.

The action is part of a crackdown on companies that use deceptive practices to sell limited health insurance plans, Gov. David Paterson announced. Such companies mislead consumers into believing they have full health insurance coverage, authorities said. State insurance regulators are examining the marketing practices of all companies selling such policies.

Limited benefit health insurance plans normally provide less-than-comprehensive hospital/medical coverage, the department said. Unlike comprehensive major medical health insurance plans, limited benefit plans often have restrictions, including on the dollar amount of coverage offered, the number of doctor or hospital visits and the types of services covered. This coverage may fall well short of the actual costs of tests, or doctor or hospital visits.

In a statement, Brooks said AMLI agreed to discontinue its limited medical benefit group policies in New York, to offer to convert terminated group policies to individual policies upon request, to cooperate with the department in resolving consumer complaints, and to create a monitoring plan for complying with applicable laws and regulations.

"Especially in this economic climate, we will not allow consumers to be twice victimized -- first by paying for insurance that covers much less than they were told it would, then by having to pay thousands more for the health care that insurance did not cover," Brooks said.

In a response, AMLI President and Chief Executive Officer John F. Ollis laid the blame at the feet of a marketing entity "with whom we no longer do business" and said the insurer brought its concerns to insurance regulators.

"We have taken substantial measures to protect the interests of those persons who purchased insurance and rely on the value of the product they purchased, and to prevent the recurrence of such unapproved activity in the future," Ollis said.

Based in New York City, AMLI is licensed in 39 states and the District of Columbia, according to an AMB Credit Report. More than half of its direct premium revenue originates in New York.

American Medical & Life Insurance Co. has a current Best's Financial Strength Rating of B+ (Good).