California reaches settlement with former Conseco unit on handling of LTC claims

State insurance commissioner says the company was the subject of many complaints

Aug 10, 2009 @ 3:54 pm

By Darla Mercado

California Insurance Commissioner Steve Poizner has reached a $500,000 settlement agreement with former Conseco Inc. unit Senior Health Insurance Company of Pennsylvania, following complaints of improper handling of claims.

The Bensalem unit, which was formerly called Conseco Senior Health Insurance Co. but is under new management, was the subject of many complaints to his office, according to an announcement from the commissioner.

The California Department of Insurance found that Senior Health Insurance improperly denied claims on its long term care insurance policies and that its practices related to handling claims were confusing.

Mr. Poizner also conducted a market conduct examination and revealed more practices related to handling claims that violated state law, as well as coverage denials that were based on a misreading of federal law. He also determined that the company was improperly applying its policy terms and denying benefits.

As a result, it will pay a $500,000 penalty and retroactively readjust some of its policyholder claims going back to Jan. 1, 2004, paying the claims with interest.

In response to Mr. Poizner’s announcement, former parent company Conseco of Carmel, Ind., stressed that it now operates separately from Senior Health Insurance and that Conseco isn’t a party to the settlement.

Conseco also said that Senior Health Insurance thinks that the problems detailed in the settlement — which covers 2004 to 2007 — were due to inconsistent interpretation of the policies’ terms under state regulations. However, the insurer spent 2007 and 2008, the last two years that Conseco owned Senior Health Insurance, making improvements to ensure that the carrier was complying with regulatory requirements.

Last November, Conseco shifted Senior Health Insurance and its LTC insurance books of business into an independent trust that has since been severed from the parent. The move was panned by consumer advocates and state regulators, including Mr. Poizner, who were concerned that the LTC consumers would be hurt as a result.

“We implemented many process improvements to ensure that the company was complying with all regulatory requirements in our relationships with our consumers,” Conseco spokeswoman Barbara Ciesemier wrote in an e-mail statement. “We understand that [Senior Health Insurance] has continued to make process improvements since its separation from Conseco.”

Attempts to reach Senior Health Insurance for comment weren’t successful.

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