For Immediate Release - July 03, 2012

Health Insurer to Pay More than $1.7 Million for Alleged Deceptive Marketing of its Insurance to Veterans

Life Insurance Company of North America Allegedly Misrepresented Its Insurance as a Veteran’s Benefit and Targeted World War II Veterans, Affecting More Than 1,000 Consumers

BOSTON – After allegedly marketing its cancer and surgical insurance through a variety of improper tactics to more than 1,000 Massachusetts veterans, including specifically targeting World War II veterans, Life Insurance of North America (LINA) will pay more than $1.7 million to consumers and the Commonwealth, Attorney General Martha Coakley announced today.

The AG’s complaint, filed along with the consent judgment in Suffolk Superior Court yesterday, alleges that LINA violated the state’s Consumer Protection Act through several deceptive practices in the marketing and administering of its supplemental health insurance products to Massachusetts veterans, including:

  • misrepresenting its insurance as a governmental veteran’s benefit;
  • illegally denying coverage based upon preexisting conditions;
  • making false claims about its rates;
  • exaggerating benefits;
  • misrepresenting coverage limits; and
  • deceptively billing Massachusetts residents.

“The conduct in this case is greatly disconcerting because LINA specifically targeted World War II veterans who deserve our deepest gratitude for their service to our country,” AG Coakley said. “LINA misrepresented the coverage it offered veterans and their families. Through this judgment, veterans harmed by this company will receive restitution and we will be able to provide funding for additional programs to support veterans’ services.”

“Any company that seeks to exploit veterans for financial profit should know that this will not be tolerated in Massachusetts,” said Department of Veterans’ Services Secretary Coleman Nee. “I thank Attorney General Coakley and her staff for their continued vigilance on behalf of veterans to ensure they have access to the benefits they so rightfully deserve.”

Since 2007, LINA has offered supplemental health insurance to Massachusetts residents, including under two particular policies: a hospital indemnity policy offering outpatient surgical benefits and a cancer-only policy. The AG’s complaint alleges that LINA marketed its health insurance to veterans through direct mail and Internet solicitations in deceptive ways, including misleadingly marketing it as though it were a government program and misrepresenting the value of its health benefits.

For example, LINA sent Massachusetts veterans direct mail solicitations stating:

“DOUBLE CASH BENEFITS: When you need extra money the most during a battle with cancer or a stay in an ICU or cardiac care unit, Hospital PAY-TO-YOU kicks into high gear with DOUBLE cash benefits up to $100 a day…$700 a week for days 1-60.”

In fact, the indemnity coverage did not provide double benefits for in-hospital (or outpatient) cancer treatment other than for hospital confinement, and did not cover various other cancer treatments at all, including outpatient radiation and chemotherapy.

Other materials stated that LINA would offer cancer protection to give patients “THE BEST CHANCE OF SURVIVAL” if cancer is ever detected. Those materials failed to disclose that it excluded coverage for cancer detected within the first sixty days of the effective date.

LINA further misrepresented the value of its health insurance by claiming that rates are held as low as possible, when in fact on average less than 10% of every premium dollar was actually paid out for benefits under the cancer-only policy and less than 30% of every premium dollar was paid out for benefits under its indemnity policy.

Under the terms of the consent judgment, LINA will pay a minimum of $650,000 in consumer relief for Massachusetts residents who were sold the insurance plans through allegedly deceptive means. LINA is required to send letters to the consumers entitled to relief and to refund consumers who purchased the supplemental insurance coverage the amount of premiums they paid minus any insurance claims collected.

LINA has decided to terminate these plans in Massachusetts and the consent judgment requires LINA to give proper notice of that termination. After affected consumers have been compensated, any remaining portion of the $650,000 will be paid to the Commonwealth.  

The terms of the consent judgment also require LINA to pay an additional $1 million to the Commonwealth as a deterrent, $500,000 of which is for civil penalties and $500,000 will be used to promote initiatives designed to assist Massachusetts military veterans, seniors, or residents with mental health conditions, or to address unlawful marketing practices targeted at such individuals. LINA will also pay the Commonwealth $55,000 for the costs of the investigation.

This litigation is part of AG Coakley’s multi-pronged approach to help Massachusetts veterans. In 2010, the AG’s Office obtained a settlement resolving allegations that a home health care company deceptively marketed its services to veterans and their spouses. Additionally, AG Coakley created an office-wide task force to ensure that Massachusetts veterans and their families have access to the full range of benefits and services offered to them.

The task force, created last October, coordinates resources and services for veterans across the AG’s Office on relevant issues they may face upon returning from deployment overseas, such as consumer, health care, and employment issues. The AG’s Office has also updated its Veterans Resource Guide, a comprehensive resource that highlights the many special protections and benefits that are available to veterans. The guide offers information regarding healthcare, education, employment and housing benefits.

This litigation is also part of the Attorney General’s sustained efforts to combat unfair and deceptive practices in the marketing and administration of health insurance.

The matter is being handled by Assistant Attorney General Emiliano Mazlen of the AG’s Health Care Division with assistance from Division Chief Thomas O’Brien and from William Mackay of the AG’s Civil Investigations Division.

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