(WKTV) - A settlement with Markel Insurance Co. after an investigation into the practice of overcharging college students on health plans was announced Tuesday.
Attorney General Eric T. Schneiderman and Department of Financial Services Superintendent Benjamin M. Lawsky said the settlement would include a $2.75 million refund to students. Markel was also fined $990,000 to the AG's office and the DFS, split evenly. The company is also mandated to end its improper commission practices.
According to the AG's office and the DFS, Markel's student health insurance plans, college accident insurance plans and sports accident insurance plans failed to meet legal requirements for minimum loss rations, leading to nearly $3 million in overcharges to about 22,000 New York college students. The investigation also showed Markel paid improper broker bonuses, which the offices say created an incentive for the broker to keep loss ratios below the legal minimum.
To prevent overcharges to consumers, New York State insurance regulations require that health insurance plans maintain a minimum loss ratio of 65 percent. A loss ratio is the ratio of the amount paid out in claims under a plan compared to the premium charged under that plan. A loss ratio also requires health insurance plans pay at least 65 cents on medical care for every dollar of the premium.
For police years 2007-08, 2009-10 and in 2011, Markel's student health plans and college accident insurance plans and sports accident insurance plans paid out far less in claims than was required to meet the loss ratio standard, leading to overcharges, the attorney general's office said.
Among the area colleges where students overcharged are Colgate University, where 1,400 students were overcharged; Herkimer County Community College, where 30 students were overcharged; SUNY IT, where 463 students were overcharged and SUNY Oneonta, where 1,497 students were overcharged.
The average refund per student will be $107.