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HCC Life Insurance facing $5 million settlement with regulators: sources

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HCC Life Insurance facing $5 million settlement with regulators: sources

HCC Life Insurance Co. is nearing a $5 million settlement with state regulators following an investigation into the company's sales of short-term health insurance plans, according to sources familiar with the matter.

Approximately 42 states took part in an investigation of HCC's practices related to marketing and issues in the sales of short-term health insurance plans. Under the terms of the agreement, which has yet to be finalized, each state that signed on would receive a portion of the $5 million.

To be compliant with the Affordable Care Act, health insurance plans must last at least one year and provide a minimum set of benefits that short-term plans often lack. In some states, such as California, short-term health insurance plans are not allowed because they take people off the ACA individual market.

The annual statement for HCC, a U.S. insurance unit of Japan's Tokio Marine Holdings Inc., noted that as of Dec. 19, 2017, four states had signed onto the settlement, which includes HCC Life affiliate HCC Medical Insurance Services LLC: Indiana, Florida, Kansas and Utah. An additional five states have so far confirmed to S&P Global Market Intelligence that they signed the regulatory settlement agreement, known as an RSA: Washington State, Connecticut, South Carolina, Mississippi and Colorado. Representatives from multiple other state insurance departments declined to comment on the matter.

HCC's annual filing stated that the RSA is effective when it is signed by 25 states or by those representing 60% of the gross premium written during the examination period, which lasted from March 23, 2010, through April 2016. The RSA does not signify any admission of wrongdoing or liability on the part of the companies, collectively referred to as HCC Group, the filing noted.

Indiana is leading the multi-state action, which means it coordinates the communication and market conduct efforts and finalizes the action. States often work together although each regulates its own insurance market separately. Indiana's department of insurance did not respond to requests for comment.

HCC Life's primary product is medical stop-loss insurance for self-insured plans, but it also sells group life, accident and health insurance, according to parent company Tokio Marine. It is domiciled in Indiana.

"TMHCC is not in a position to comment on this matter at this time," said Doug Busker, vice president of financial planning and analysis and public relations for Tokio Marine HCC. He said Tokio Marine HCC, or TMHCC, is the marketing name used to describe the affiliated companies under the common ownership of HCC Insurance Holdings Inc. HCC Life is a wholly owned subsidiary of HCC Insurance Holdings.

Separately, affiliates of TMHCC are also facing a multi-state class-action fraud lawsuit, filed in an Indiana federal court Jan. 3, alleging that the companies refused to pay insurance benefits to a number of short-term insurance plan consumers. The court set a deadline of March 9 for the company to respond to the allegations.