August 28, 2009

Missouri Department of Insurance sues Arkansas insurer for defrauding cancer victims


Jefferson City, Mo.  - Missouri insurance regulators have gone to court to stop an Arkansas-based life insurance company from illegally changing the terms of its cancer insurance policies. The state Department of Insurance says Central United Life Insurance Company is trying to avoid paying thousands of dollars due each of its Missouri policyholders who get treatment for cancer.

Central United has sold contracts, known technically as "specified disease" policies, to Missourians since 1997. These insurance policies promise to pay policyholders the amount charged for their medical care if they are diagnosed with cancer, even if their treatment is actually paid for by health insurance.

The civil lawsuit, filed in Cole County Circuit Court, alleges that Central United changed its claims-handling practices in late 2003 to drastically reduce payments to policyholders with cancer.

"The very essence of insurance is providing protection when life-changing events occur," said John M. Huff, Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP). "There are few events more life-changing than cancer, and this arbitrary decision by Central United is an attempt to abandon its solemn responsibility to protect its policyholders facing a serious and sometimes deadly illness."

At issue is Central United's decision to pay policyholders based on paid treatment costs, rather than what's known as "actual charges." When consumers with health insurance receive medical treatment, insurance pays a negotiated rate, rather than actual charges. For example, a hospital's actual charges might be $10,000, but the health insurance company might have negotiated that payment down to $6,500.

The lawsuit asks that Central United be ordered to review its claims for cancer policies written before 2003 and pay restitution to any policyholders who were short-changed on their claims. The lawsuit also seeks monetary penalties to be paid to the state public school fund, as required by Missouri law.