Major Insurance Investigation Leaves MEGA Life Facing Hefty Fines

MEGA Life and Health Insurance Company, along with its parent and sister companies, HealthMarkets, Mid-West National Life and Chesapeake Life insurance companies, recently scored very low on a multi-state insurance examination by the National Association of Insurance Commissioners, 35 states and the District of Columbia. Regulators say that the companies will likely face large fines based on many areas of deficiencies.

The investigation

The much anticipated results of the multi-state investigation, which began in 2005, show that the companies’ operations were deficient in five major areas. According to a press release from Washington State’s Insurance Commissioner (, those five areas included:

  • Oversight, communication, monitoring and training of agents
  • Processing and handling of claims made by policyholders
  • Disclosure of relationships with membership associations and affiliated companies to consumers and policyholders
  • Handling of policyholder complaints and grievances
  • Adherence to a compliance plan

Although many of the states involved in the investigation have already fined MEGA Life and its parent and sister companies separately, regulators concluded that the companies’ actions and complaint histories had not significantly improved when the multi-state investigation had begun. Regulators say that hefty fines are likely to be imposed against the insurers and that they will make that announcement shortly.

Continuous deficiencies

While there were four insurance companies involved in this investigation, MEGA Life has made continuous headlines over the past few years for allegedly deceiving policyholders about the type of insurance it offers. MEGA generally sells low cost, low benefit policies to the self-employed through the National Association for the Self-Employed and Americans for Financial Security, which require policyholders to join these associations for a fee.

However, MEGA agents often represented themselves as brokers – meaning that policyholders thought that the agents would be obtaining quotes from various companies and presenting them with the best plan available. Little did they know – the plans that MEGA agents always presented were only from those two associations.

Continuous turmoil

MEGA Life has been sued by individuals for bad faith insurance practices over and over again. The company has also been reprimanded and/or fined by several state insurance departments including Delaware and Massachusetts and has been given the lowest rating by the Better Business Bureau.

Mega Life was purchased by The Blackstone Group in 2006 and has reported changing some of the practices for which they’ve been fined. While that is a positive aspect, consumers who purchased insurance from MEGA or its parent or sister companies – and then had valid claims denied – are entitled to receive those benefits. If you are one of those consumers, contact an attorney who understands insurance matters and whose practice focuses in that area of law. To contact a qualified attorney for a free, no obligation consultation, please click here.

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