Okla. Commissioner Flexes Regulatory Muscle in Marketing Flap

May 22, 2007

Oklahoma Insurance Commissioner Kim Holland is flexing her regulatory muscle in an investigation of Medicare marketing that has uncovered misconduct by some insurance agents,

The probe led to an appearance before a U.S. Senate panel where she complained that federal law bars her from going after companies that use questionable sales practices.

Holland, elected to a four-year term last year on campaign promises to hold the industry accountable and make her office “squeaky clean,” is testing the limits of her authority in a market conduct examination of Humana Insurance Co., the second largest marketer of private health plans to Medicare recipients in the nation.

The investigation, which involves visiting a company’s offices and reviewing its files to assess sales practices, was prompted by numerous reports of agents enrolling beneficiaries in Humana products that they did not understand and did not want, Holland told The Associated Press.

“We’re getting a lot of concerns from citizens who have bought products. They just did not understand what they were buying,” said Holland, an insurance agent for 25 years before she was appointed to the job by Gov. Brad Henry in January 2005.

“They didn’t realize there were restrictions in physician choice,” Holland said. “Sometimes that causes a senior citizen a great deal of problems.”

Among other things, the investigation found that the company accepted business from 68 agents who were not licensed to sell insurance in the state. Holland’s office has ordered Humana to take corrective action to better protect consumers from high-pressure sales tactics.

“It puts the industry on notice – this is not going to be tolerated,” she said. “They’re going to play by the rules.”

Tom Noland, a senior vice president for Louisville, Ky.,-based Humana, said Humana has already implemented several remedial steps, including upgrading the company’s telephone referral system to assure that calls from Oklahoma Medicare recipients are routed to agents licensed in the state.

The company has also strengthened the licensing program with stronger licensing policies for agents and is counseling and coaching its agents, Noland said. Humana has zero tolerance for violations of marketing guidelines and has fired one agent and declined to re-certify others as a result of the investigation.

“This certainly is an aberration within our company. We have a strong code of ethics,” Noland said.

Of 950 agents who were reviewed, only 68, or 7 percent, of Humana’s agents did not have appropriate licenses to do business in Oklahoma. “No commissions were paid to any of the agents for sales that were questioned, Noland said.

Holland said that although only 7 percent of the agents did not have Oklahoma licenses, they represented about 35,000 Oklahoma policyholders.

Holland said she launched the investigation to fill a regulatory vacuum left by the inaction of the Centers for Medicare and Medicaid Services, which regulates Medicare Part D and Medicare Advantage programs.

There are almost 500,000 Oklahomans enrolled in Medicare Part D or Medicare Advantage programs but CMS has no employees in the state, Holland said. Holland’s office employs a team of 12 investigators who can do the job but federal law pre-empts states from regulating the sales and marketing practices of the plans.

Those rules effectively prevent her from doing her job, she said.

Holland said she traveled to Washington in February to express her concerns directly to CMS officials.

“I did not ever hear back from them,” Holland said. “If we had not examined the company, CMS would not have been aware of these issues.”

Holland testified before the Senate Special Committee on Aging last week and said the federal government’s failure to adequately regulate Medicare Part D and so-called Medicare Advantage plans “has led to virtual lawlessness in Oklahoma.”

“Unlicensed agents are setting up shop in pharmacies, large retailers, and nursing home lobbies to prey upon seniors’ confusion and concern over their medical care coverage,” Holland said.

Holland, who described herself as an advocate for senior rights, said the problems she uncovered with Humana’s marketing practices are more widespread than a single company.

“These are reflective of what’s occurring with many companies and across the country,” she said. She said she has received complaints about the marketing practices of other providers of Medicare managed care plans but not enough to prompt an investigation.

“They’re actively taking advantage of a new market. This is what happens when you have an unbridled free market,” she said.

The investigation found that Humana agents sold Medicare policies to beneficiaries with lifelong mental conditions and others who did not understand the policies.

Holland said that investigators found that some people who wanted to purchase drug coverage from Humana were instead enrolled in a more comprehensive plan.

In one complaint, a man was switched from traditional Medicare to a Humana plan. He lost the extra benefits he had under a Medicare supplement policy from Blue Cross and Blue Shield of Oklahoma and incurred additional costs when he became ill.

“The member had to borrow against his house to pay for these uninsured hospital and medical expenses,” the report states. “This was solely due to the failure of the agent to properly explain his existing coverage and the impact of purchasing a Medicare Advantage plan.”

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