N.Y. Market Conduct Exam Finds Aetna Units Violated State Insurance Laws

A market-conduct examination of three units of health insurer Aetna Inc. by the New York State Insurance Department showed violations of state insurance laws and regulations over explanation of benefits forms and utilization-review programs, among others.

The exam covered a review of how Aetna Health Inc. (a New York corp.), Aetna Health Insurance Company of New York and Aetna Life Insurance Co. fulfilled their contractual obligations to policyholders and claimants, according to a market-conduct exam report the insurance department released in May. The exam covered the period of March 1, 2001 through Dec. 31, 2005, the report said.

The department has not yet determined a fine on the matter, said Ron Klug, a spokesman for the insurance department, in an e-mail.

The exam's results showed "certain operational deficiencies that indicate areas of weakness and/or directly impacted the companies' compliance" with New York insurance law, regulations and the New York public health law, the report said. The exam covered Aetna's fully insured, employer group health plans, Klug said.

Because the exam covered operations from 2001 to 2005, "the majority of the findings have already been corrected, although the department is just finalizing its report," said Susan Millerick, a spokeswoman for Aetna (NYSE: AET), in an e-mail. "This was a very lengthy and extensive examination of our operations and we worked cooperatively with the DOI throughout the exam process."

Among the exam's findings:

-- Aetna Health Inc. didn't consistently submit explanation of benefits forms to its members as required under New York insurance law. During 2005, there were 354,999 of these violations, the report said.

-- EOB forms that were submitted to members of all three of the Aetna companies either were unclear or didn't always contain all of the information required under state insurance law and the New York public health law.

All process errors related to EOBs have been corrected and EOBs issued by Aetna's claim systems now "have a more consistent look and feel," Millerick said.

-- In violation of New York insurance law and its own policy contracts the department approved, Aetna Health Insurance Company of New York and Aetna Life didn't grant New York statutory appeal rights to members with New York-based contracts, but who lived outside of New York, the report said.

-- Aetna Health Insurance Company of New York and Aetna Life violated various parts of New York insurance law by failing to properly enforce differing aspects of their utilization-review programs. These included failing to provide all of the internal and external appeal rights, the report said.

Aetna corrected the utilization-review findings noted in the exam during 2007 and 2008, Millerick said.

-- Aetna Life used contract forms that communicated information that violated New York insurance laws and regulations, the report said. These included a contract Aetna Health Inc. and Aetna Health Insurance Co. of New York used for all members "for many years" that advised members that they weren't permitted to issue complaints to the department until all internal appeals had been settled, the report said.

Aetna told the department that in November 2006 "we implemented revised language to remove the requirement that our complaint and appeals procedures be exhausted prior to contacting the department of insurance," Millerick said. "Our amended language was approved by the department at that time."

Aetna Health Inc. (a New York corp.), Aetna Health Insurance Company of New York and Aetna Life Insurance Co. each all currently have Best's Financial Strength Rating of A (Excellent).

Shares of Aetna were trading at $29.65 the afternoon of June 22, down 0.87% from the previous close.

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])