Delaware Fines MEGA Life Insurance Co. $500,000 for Insurance Violations

The Delaware Insurance Commission fined MEGA Life & Health Insurance Company of Texas (MEGA) $500,000 for steering customers into individual health insurance policies, failing to provide state-required coverages, engaging in deceptive and improper marketing, mishandling consumer complaints and failing to institute adequate management controls.

According to the Commissioner’s office, MEGA routinely violated Delaware law between January 2002 and June 2004. Nearly 3,000 Delaware residents were affected by MEGA’s violations which were discovered during an insurance investigation. The examination found that MEGA:

  • Failed to provide mental health coverage and immunization coverage required by Delaware law.
  • Did not use the correct names of plans to allow consumers to match the product issued by MEGA with the product for which they applied.
  • Failed to adequately train insurance agents on plans available to small employers.
  • Failed to institute sufficient procedures for taking, tracking and responding to customer complaints.
  • Failed to have appropriate written procedures in place to assure consistent operation and activities compliant with applicable statutes, rules and regulations.

The $500,000 fine – the largest against a health care provider in Delaware history – may be reduced by $400,000 if MEGA complies with 18 pages of remedial measures contained in the 200 page Commission report within two years. A MEGA spokesperson has said that the company will comply.

MEGA routinely marketed its products to self employed individuals. The company has had countless lawsuits filed against it by individuals, groups and state insurance commissioners. Seven states have issued fines against the carrier and 36 other states are currently investigating the company’s practices. MEGA and its sister company, Mid-West National, do business with their parent company, HealthMarkets.

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