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News from the New York State Governor

For Immediate Release: August 13, 2009
Contact: Marissa Shorenstein | | 518.474.8418 | 212.681.4640


Plans Offer Less Health Insurance Coverage than Many Buyers are Led to Believe

Shutdowns, Fines, Hearings Among Measures Taken to Protect Consumers

Governor David A. Paterson today announced that New York State is cracking down on companies that sell limited benefit health insurance plans that mislead people to believe they have full health insurance coverage. Some New Yorkers who relied on and tried to use such plans have ended up with unexpected medical bills amounting to thousands of dollars.

“More than 2.5 million New Yorkers have no health coverage, and with tens of thousands losing their jobs, that number is growing. Unfortunately, some businesses are taking advantage of that need to sell limited health insurance in ways that mislead consumers to believe they have purchased full coverage. If they become seriously ill, consumers who buy these products find themselves with costly bills that they are unable to pay. New York will not allow disreputable businesses to take advantage of its residents,” Governor Paterson said. “That is why I have directed the State Insurance Department to act immediately to protect consumers.”

Unlike the comprehensive major medical health insurance plans offered through most employers, limited benefit plans often have restrictions, including on the dollar amount of coverage offered, the number of doctor or hospital visits and the types of services covered. This coverage may fall well short of the actual costs of tests, or doctor or hospital visits.

The Department has already fined one insurer offering these plans, American Medical and Life Insurance Company (AMLI), $700,000 for numerous violations, and imposed restrictions on the company. The company can no longer sell its limited benefit products in New York and has been forced to pull its nationwide television commercial, which made grossly exaggerated promises. The commercial was the company’s main marketing tool. In addition, a second insurer has agreed to suspend sales of a similar product nationally while the Insurance Department investigates its marketing practices.

The Department has also directed insurance companies to provide information to the Department about any limited benefit health plans they sell in New York. The State will hold public hearings to determine if the proper course is tighter regulation or banning the product completely. Finally, the Department will consider proposing new regulations to guarantee consumers are properly informed about just how restricted limited benefit health insurance plans may be.

These actions were triggered by an Insurance Department investigation of AMLI, begun after consumers complained to the Department. A sampling of complaints received by the New York State Insurance Department include:

  • A Rochester-area woman purchased health insurance from a telemarketer and agreed to have the $419 a month premiums paid by automatic charges to her credit card. She was provided no written documents spelling out details of the coverage. Soon afterward, she needed hospitalization, which cost nearly $28,000. It turned out the policy, sold by an agent unlicensed in New York, covered only limited medical benefits and paid only $1,164 of the expenses. AMLI paid in full only after the Department intervened.
  • A young man suffered a stroke at the age of 36. The final medical bill amounted to $30,167.04, of which AMLI paid $250. AMLI paid in full only after the Department intervened.
  • A woman went to the emergency room with stomach pains and a day later received an appendectomy. The final medical bill amounted to $20,853.69, of which AMLI paid $1,416.10.

“While New York is ahead of most states because we have already taken smart steps toward universal health insurance coverage, many working families are still in dire need of affordable comprehensive health insurance. This is why I will to continue to work closely with President Obama and Congress to ensure that working families have the real health insurance they need and deserve at an affordable price,” Governor Paterson said. “I strongly urge all states to join with New York in blocking AMLI from selling this product to consumers.”


Additional news available at
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New York State | Executive Chamber | | 212.681.4640 | 518.474.8418

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