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Insurance Department Examination Reveals Short-Term Limited Duration Violations; Restitution for Pennsylvania Consumers


Harrisburg, PA – Pennsylvania Insurance Commissioner Jessica Altman recently released reports from market conduct examinations involving two short-term limited duration insurance companies, resulting in $400,000 in penalties and interest payment restitution for Pennsylvania consumers.

"Governor Wolf and the department have prioritized consumer protection in the insurance industry," Commissioner Altman said. "Market conduct examinations provide an opportunity to review a company's practices and procedures, giving us the leverage needed to protect consumers when entities are not in compliance with Pennsylvania's insurance laws."

The examination of Companion Life Insurance Company (CLIC) was initiated in January 2018, following internal referrals from the Department's Consumer Services Bureau. Colorado, Delaware, and Vermont were concurrently examining CLIC, resulting in similar findings of noncompliance and violations of state insurance laws and regulations. Pennsylvania's findings included a lack of oversight of Managing General Agents/Third Party Administrators, accepting business from unappointed agents, failure to file forms and rates, lack of records and documentation, claims handling, and missing state-required contract provisions.

Given the similar findings in examinations, CLIC was referred to the NAIC's Market Actions Working Group (MAWG), and in fall 2019, CLIC acknowledged the need to address these issues nationwide and agreed to pursue a multistate Regulatory Settlement Agreement (RSA) to resolve the violations. In response, the department suspended its examination and became part of the MAWG action, as all issues found in Pennsylvania's exam would be addressed in the settlement agreement.

The RSA outlined a corrective plan to address noncompliance and violations found during the MAWG review. Companion Life will undergo a one-year monitoring period that is expected to begin within the next couple of months, and will submit quarterly reports to the lead states, including Pennsylvania, detailing the company's activities to correct deficiencies.

States participating in the RSA levied a $5 million penalty against Companion Life. Those funds were distributed based on the jurisdictions' percentage of 2019 gross premiums written.  Pennsylvania's allocation is $249,958. In addition, CLIC consumers will receive interest payments to address untimely determinations for claims that have now been paid.

The department also released a report on a market conduct examination conducted on the practices and procedures of Freedom Life Insurance Company. The examination, which covers the period from July 2016 to September 2017, identified concerns with the company's claim processing, including notification and processing delays; as well as unclear statements made by producers and vague language in company advertisements, which members interpreted as misrepresenting actual coverages provided under the company's short-term limited duration health plans.

Freedom Life Insurance Company has been ordered to address many of the violations through changes in company practices and procedures, and paid a $150,000 penalty. The department will be verifying that these corrective actions have taken place through a reexamination process.

"The department continues to closely monitor activity in the market related to short-term limited duration insurance and other excepted benefit plans that could be inappropriately marketed or inaccurately viewed by consumers as true health insurance," Altman said. "As a result of these examinations, both Companion Life and Freedom Life will improve their procedures to help consumers make better informed decisions about their coverage and their care, but consumers should continue to be vigilant in considering any of these options and understanding their limitations.

"At the same time, we remain committed to pursuing entities that are misleading consumers or are not giving its members the benefits they are entitled to under law. Examinations like these are a key tool to help the department in its ongoing oversight of the industry," Altman added.

For more information about excepted benefit products and how they differ from comprehensive health insurance, click here.

Consumers who need to buy health insurance for themselves or their family and want to be certain they are purchasing comprehensive major medical insurance, are encouraged to visit, Pennsylvania's state-based health insurance marketplace. All plans on sold Pennie are comprehensive health insurance and Pennie does not offer excepted benefit plans. Pennie's open enrollment period, where any Pennsylvanian can enroll in coverage, began on November 1 and will run until January 15. Consumers need to enroll by December 15 to secure coverage that begins on January 1, 2022.

Consumers who believe their insurance plans are not in compliance with commonwealth laws or regulations, or who have questions about the benefits to which they are entitled, are urged to contact the Insurance Department's Bureau of Consumer Services online or at 1-877-881-6388.

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