January 18, 2022

Volume XII, Number 18

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Multistate Regulatory Action a Significant Reminder that Insurers Must Only Conduct Business with Licensed TPAs

A life and health insurer recently reached a settlement agreement with thirty-nine (39) state insurance departments following a targeted multistate market conduct examination (“Multistate Examination”). The Multistate Examination focused on the insurer’s Life, Accident, Health and Disability business in several areas of operation, including its oversight of Third-Party Contractors and claims handling. The insurance departments of Delaware, Michigan, Pennsylvania, South Carolina, and Texas (the “Lead States”) led the Multistate Examination. 

The Multistate Examination resulted in a Regulatory Settlement Agreement (“Settlement Agreement”) in which the insurer was required to make a $5,000,000 penalty payment to be divided among all participating states. In addition to the Lead States, thirty-four (34) other state insurance departments agreed to participate in the Settlement Agreement. 

In addition to the $5,000,000 payment, the Settlement Agreement also required that the insurer take certain corrective actions as part of adopting a Compliance Plan. Some of the items in the Compliance Plan included the following: 

  • The insurer was required to make a Market Conduct Compliance Manual available to all Third-Party Contractors and to enforce compliance with its terms and procedures.

  • The insurer had to ensure that all contracts with its Third-Party Contractors complied with state insurance laws.

  • The insurer had to ensure that Third Party Contractors it is doing business with are properly licensed as required by state insurance laws.

  • The insurer had to provide documentation to the Lead States verifying that it has conducted compliance audits of its Third-Party Contractors.

  • The insurer had to review its claims payments for accuracy and timeliness and also ensure that its claims handling procedures and those of its Third-Party Contractors adhere to the claims handling requirements of state insurance laws.

While there were multiple issues involved in this multistate regulatory action, it resulted in a significant monetary penalty and action by thirty-nine (39) state insurance departments. The matter is a cautionary and costly reminder that insurers must only conduct business with Third Party Administrators (“TPAs”) that are properly licensed in all required jurisdictions and that insurers must also ensure their Third Party Administrator (“TPA”) business partners are in compliance with state insurance laws.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume XI, Number 319
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About this Author

Steven L. Imber, Polsinelli PC, Insurance Regulatory Attorney, Enforcement Actions Lawyer,
Shareholder

Steve Imber chairs Polsinelli's Insurance Business and Regulatory group.  As a former General Counsel at a state insurance department, Steve Imber has the knowledge and experience to provide quality counsel to insurers, third party administrators, insurance agencies, medical discount plans and other insurance regulated entities. His practice includes representing and assisting clients on multi-state and national licensing projects, research projects, enforcement actions, market conduct examinations, audits and compliance programs and various other regulatory and...

913.234.7469
Jennifer Osborn Insurance Lawyer Polsinelli Law Firm
Shareholder

Jennifer Osborn Nix works diligently for insurance companies, third-party administrators, and other regulated entities to further their goals and help them remain compliant within the 50-state regulatory scheme. She focuses on insurance regulatory and compliance issues, with a primary emphasis on life and health insurance matters.

Jennifer works with many regulated entities, including many in the health care sector, who rely on her for research, advice, strategic counsel, and licensing.

913.234.7472
Shareholder

Justin Liby has a talent for organizing and managing large national and multi-state licensure and research projects. This knack provides him with a solid foundation for crafting and implementing sound, efficient strategies that achieve success for his clients. Justin concentrates his efforts on helping the insurance industry navigate the formidable federal and state regulatory maze to achieve the industry’s business needs. He stays current in the insurance industry's evolution, as well as the legislation and regulatory activity impacting the industry.

...
913-234-7427
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