Answers to Insurance Continuing Education Questions Online!

The Department of Insurance has published a new "Determining Your Insurance Continuing Education Requirements" online resource, where insurance professionals can complete a short series of questions to determine their continuing education ("CE") requirements.  The majority of calls that the Department's Licensing Section receives, and the majority of license renewal deficiencies, have been related to the CE requirements.  To enable staff to concentrate on promptly processing license and renewal applications, we are asking insurance professionals who have CE-related questions to use the new online resource, and to only call the Licensing Section with questions that are not addressed online.

Director Hess Issues Regulatory Bulletin 2016-02: 2016 Insurance Laws

Director Hess has issued Regulatory Bulletin 2016-02, which summarizes the major, newly enacted legislation affecting the Department, its licensees and insurance consumers.

Receivership Order Issued Against Meritus Health Insurers

Printable Version

Phoenix – The Maricopa County Superior Court today issued an Order for Appointment of Receiver and Injunction against two Arizona health insurance companies, Compass Cooperative Health Plan, Inc., a health care services organization doing business as Meritus Health Partners, and Compass Cooperative Mutual Health Network, Inc., a disability insurer doing business as Meritus Mutual Health Partners.  Arizona Department of Insurance (ADOI), Interim Director, Leslie Hess, filed suit against the health insurers on August 1, 2016, requesting that the Court find both companies insolvent and issue an order appointing the Director of ADOI as the receiver for both companies. 

Both companies were placed under supervision by the Director of ADOI on October 30, 2015.  As a result, the companies were ordered to stop writing new and renewal business as of December 31, 2015.  With the issuance of the Director’s supervision order, Meritus enrollees were eligible to participate in open enrollment to obtain other health insurance for plan year 2016.

Under the Department’s Supervision, both companies have been winding down their operations and paying provider claims (hospitals, doctors, etc.).  However, the companies ran out of money and were unable to continue to pay provider claims without liquidating assets.  The Director sought an Order of Receivership to be able to liquidate the companies’ assets in order to pay provider and creditor claims in accordance with Arizona law. 

“Requesting the Court issue an order placing any company into receivership is not an easy step for me to take,” said Interim Director Leslie Hess.  Our agency’s number one priority is to protect the citizens of Arizona and I believe this order is necessary to do just that.” 

Meritus was incorporated December 7, 2012, as a nonprofit corporation and was one of the original 23 consumer operated and oriented plans (CO-OPs) that were formed around the country to offer health insurance.  The two Meritus companies provided health insurance coverage for approximately 59,000 Arizona residents in Maricopa, Pima and Pinal counties.

Copies of the Complaint and the Receivership Order are available on the Department’s website under the Meritus link.

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About the Arizona Department of Insurance

The Arizona Department of Insurance, an agency of the State of Arizona, is responsible for the education and protection of insurance consumers and for oversight of the insurance industry in this state.

Arizona Man Arrested in New Jersey on 92 Counts of Fraud

Phoenix, AZ –The Arizona Department of Insurance Fraud Unit, in a joint effort with the New Jersey Department of Insurance, arrested Brian McFarland on a total of 92 criminal counts involving fraud schemes, identity theft, and theft totaling more than $450,000. On October 17th, McFarland was taken into custody in New Jersey and will be transported back to Phoenix, where he faces prosecution by the Arizona Attorney General’s Office. McFarland is alleged to have forged his name on the Arizona insurance producer license of another agent with the same last name in 2005, and to have worked under the falsified license as an insurance agent for Resource Marketing Insurance Agency, LLC, which conducted business under the name Legends Environmental Insurance Services, LLC (“Legends”). In September 2013, Legends merged with Insurance Office of America, Inc. In the process of checking the background of the Legends employees they intended to retain, Insurance Office of America discovered McFarland’s forgery and reported it to the Arizona Department of Insurance Fraud Unit.

Based on evidence obtained from Insurance Offices of America, on July 23, 2014, the Arizona Department of Insurance Fraud Unit obtained a warrant to search Mr. McFarland’s place of business and his residences in both Phoenix and Flagstaff, Arizona. Initially, Mr. McFarland was believed to have sold over 200 commercial insurance policies while posing as a licensed agent. However, the Fraud Unit’s investigation suggests McFarland set up fraudulent bank accounts under Legends’ name without the agency’s knowledge, and diverted into these bank accounts approximately $453,614.84 in premium payments belonging to 87 different commercial environmental companies located throughout the U.S. No insurance policies were ever issued for the premiums paid by the environmental companies.

During the investigation, McFarland moved out of Arizona and was recently located in New Jersey. Thanks to the coordinated efforts of the New Jersey Department of Insurance and the Fugitive Investigations Unit of the Gloucester County, New Jersey Prosecutor’s Office, Brian McFarland was arrested and will be returned to Arizona for prosecution.

Director's Message Regarding Health Insurance Premiums for 2017

As has been reported on our website and on healthcare.gov, Arizona’s rates for Obamacare-compliant health insurance for plan year 2017 are increasing significantly.  First, I want to say that I am sorry that your rates have increased so substantially.  While the Department’s role in rate review is limited, I want to acknowledge your frustration with the rising health insurance costs.  It is a difficult time for the Arizona health insurance market and the 2017 plan year will be extremely challenging.

As you are likely aware from the extensive media coverage, almost all of the insurers participating on the Arizona healthcare exchange, commonly known as the Obamacare marketplace, withdrew from the exchange or discontinued their exchange plans for next year. Neither the state nor the federal government have the authority to compel a company to sell insurance on the exchange.  As explained to the Department, the withdrawals were due to insurance companies suffering large financial losses from their participation on the exchange.  As a result, Arizona was left with only one insurance company per county that will be issuing policies that are eligible for premium subsidies on the exchange in 2017.  This means that one insurer will be absorbing all of the major medical insurance risk on exchange in each county.  Unfortunately for us, this substantial assumption of risk led to the filing of significant premium rate increases to cover that financial risk.

When a rate increase is filed with the Department of Insurance, the ADOI does not have legal authority to approve or disapprove the major medical insurance rate.  The Department’s responsibility is to review the rate filing to confirm that valid, detailed financial and actuarial information (as required by federal and state law) is provided in support of the rate increase.  In order to perform that review, the ADOI engages independent actuaries to scrutinize the rate filings in depth to confirm compliance with the laws and regulations.

Despite the magnitude of the premium increases, the independent actuaries’ detailed reviews found that the insurers had provided the required financial and actuarial information in support of the rate increases.  The ADOI carefully supervised and reviewed the actuarial work performed, and determined that the premium rate increases were in compliance with Arizona law.  Therefore, the ADOI “filed” the rates for use in Arizona.

Insurers are required to provide a written description justifying the rate increase (an actuarial memorandum) and a simple and brief narrative describing the data and assumptions that the insurer used to develop its rate increase (a consumer justification).  This information is available for your viewing at https://ratereview.healthcare.gov/

Lastly, while many individuals who purchase their coverage on the exchange receive subsidies that will cover most or all of the premium increase, roughly a quarter of those enrolled in Marketplace plans are ineligible for subsidies and will be faced with the difficult choice of paying a dramatically higher price or going without insurance and facing a stiff penalty from the federal government.  The Governor’s Office has expressed its concerns to Congress about this situation (http://www.mccain.senate.gov/public/_cache/files/556409f1-2002-4ec5-9301-54c8438df9e5/corieri-testimony-senate-homeland-security-9-15-16.pdf) and encourages you to contact your federal representatives as well with your concerns (https://www.usa.gov/elected-officials).

GO-PRO Video Leads to Conviction of Insurance Fraud Suspect

Phoenix, AZ – Robert Atlas falsely reported to GEICO that he had crashed his 2012 Corvette Stingray while exiting the I-10 freeway, on the exit ramp at Wild horse pass in Chandler Arizona. Robert was paid $61,465.11 by GEICO for the loss of his Corvette. It was later discovered that on 10/10/2015, Robert Atlas had actually raced his Corvette Stingray in a drag race at a drag racing event at Wild Horse Pass Motorsports Park. He subsequently lost control of his corvette during the race and crashed into the concrete barrier totaling his Corvette Stingray. This crash was captured on a Go-Pro video and published on YouTube. The policy does not cover damage caused to the vehicle if it was involved in drag racing. Robert was later shown the video footage and he admitted to making the false claim to GEICO Insurance.


On 1-25-17, Robert Atlas pled guilty to Insurance Fraud as a Class 6 Undesignated offense and as required by the Plea Agreement he paid the entire amount of restitution back to GEICO Insurance prior to sentencing. He was sentenced to two years supervised probation and was assessed $1,560.00 in court costs.


The case was investigated by the Arizona Department of Insurance Fraud Unit and prosecuted by the Arizona Attorney General’s Office.


YouTube video below.


https://www.youtube.com/watch?v=j-xdgp3x4g0

Final Extension of Transition Policies through December 31, 2017

Phoenix - The Arizona Department of Insurance (ADOI) announced that insurers in the individual and small group major medical health insurance markets can choose to renew transitional policies through December 31, 2017. Transitional plans are non-ACA compliant policies that have been continuously in effect since by or before December 31, 2013.

At least six health insurers have individual or small group transition policies still in effect in Arizona. By extending the transition period, consistent with the February 29, 2016 Bulletin issued by the Center for Consumer Information and Insurance Oversight (CCIIO), insurers will have the option to continue the pre-2014 individual and small group policies covering more than 100,000 Arizonans through the end of 2017. Insurers that offer  this short term extension of coverage are required to send each policyholder a Renewal Notice that explains the offer to continue the transition policy to the end of 2017 and includes information regarding any related price increase.

Each policyholder that chooses to renew his or her transition plan will receive a final notice, by or before October 1, 2017, explaining that the transitional plan is being discontinued effective December 31, 2017. However, extending transition plans to the end of 2017 allows affected policyholders to select a new plan during the annual open enrollment period along with other Arizonans.

The transition extension does not affect grandfathered policies issued prior to March 23, 2010. These policies can remain in effect as long as they maintain grandfathered status.

This decision extends the Department’s prior determination on transitional plans as outlined on March 27, 2015.