For Immediate Release - April 25, 2011

Health Insurance Company to Pay $760,000 for Unlawfully Selling Unauthorized Health Insurance in Massachusetts and Failing to Cover Mandated Benefits

BOSTON - Attorney General Martha Coakley announced today that the United States Life Insurance Company in the City of New York (U.S. Life), a subsidiary of AIG, will pay full restitution and payments to the Commonwealth for selling and marketing illegal health insurance products to Massachusetts consumers. These products did not cover mandated benefits as required by Massachusetts law. Under the terms of the settlement, U.S. Life must pay $760,000 with $500,000 set aside to refund premiums and pay claims to consumers for mandated services and $260,000 to be paid to the Commonwealth.

"When Massachusetts consumers buy health insurance, they should be able to feel confident that the coverage complies fully with Massachusetts law," Attorney General Coakley said. "Our office will continue to monitor the marketing and payment practices of health insurers issuing coverage for Massachusetts residents to make sure that consumers are not misled and are not denied benefits to which they are legally entitled."

According to the Attorney General's complaint filed with the consent judgment in Suffolk Superior Court, U.S. Life sold health insurance policies in Massachusetts that were not authorized for sale. The complaint also alleges that U.S. Life did not cover health services required by Massachusetts law. The mandated services at issue include mental health, maternity health care, infertility care, "pap" test screening, mammography, and preventive care for children up to age six. By marketing health insurance that was not authorized for sale and by denying mandated benefits to Massachusetts residents, U.S. Life violated the state's Consumer Protection Act.

Under the terms of the consent judgment, U.S. Life will set aside $500,000 as a minimum amount for consumer relief to pay Massachusetts residents who were sold these illegal plans. The consent judgment requires U.S. Life to send letters to consumers entitled to relief. The terms of the agreement require U.S. Life to refund premiums paid by Massachusetts residents who purchased unauthorized health insurance coverage less any claims paid under it. The consent judgment also requires U.S. Life to pay for mandated services previously denied to Massachusetts residents who were covered under certain health insurance policies. After affected consumers have been compensated, any remaining portion of the $500,000 will be paid to the Commonwealth. The terms of the consent judgment also require U.S. Life to pay $260,000 to the Commonwealth. As part of the consent judgment U.S. Life did not admit any liability and cooperated in the resolution of this matter.

Consumers concerned about illegal health insurance practices in the Commonwealth are urged to call the Attorney General's Health Care Hotline at (888) 830-6277. Consumers who wish to purchase health insurance can find a number of available options at Guidance on how to choose a health plan is also available on the Attorney General's website.

This matter was handled by Assistant Attorney General Emiliano Mazlen of Attorney General Coakley's Health Care Division with assistance from Division Chief Thomas O'Brien and Paralegal-Mediator Marie DeFer also of the Health Care Division.