Governor Andrew M. Cuomo today announced that four insurers will pay $2.2 million in restitution to 3,475 New York seniors from across the state for overcharging them on insurance policies in violation of New York law. The refunds, which are for Medicare supplemental insurance (commonly called “Medigap”) products, average $624 per policyholder. Distribution of the funds will begin on September 30.

“We simply will not tolerate insurers overcharging and shortchanging seniors in New York,” said Governor Cuomo. “State law requires insurance companies to spend a minimum amount of premium dollars on medical costs in order to keep healthcare coverage affordable for consumers – yet these companies acted otherwise. My Administration will continue to work to protect New York consumers by holding insurance companies accountable, and we are pleased to deliver these refunds back to our seniors.”

Benjamin Lawsky, Superintendent of Financial Services, ordered the refunds after a Department of Financial Services (DFS) investigation uncovered that the companies had failed to comply with New York laws that require insurers to spend a minimum amount of premium dollars on medical bills – rather than on administrative expenses or excess profits. The four insurers that are providing the refunds today are: American Progressive Life and Health Insurance Company of New York (White Plains, NY), Excellus Health Plan, Inc. (Rochester, NY), First United American Life Insurance Company (Liverpool, NY), and Transamerica Financial Life Insurance Company (Harrison, NY). Policyholders that will be receiving restitution from these companies are located throughout the state.

Superintendent Lawsky said, “We will continue to vigorously enforce these critical consumer protections, which help keep premiums down and insurance companies honest. That’s especially important for New York’s seniors – many of whom live on fixed incomes. Making sure that insurers play by the rules is vital to keeping health care coverage affordable and accessible for New Yorkers.”

The state law requiring a minimum amount of premiums to be spent on medical benefits is called the “medical loss ratio” (MLR), which sets the percentage of premium dollars that must be spent on medical claims. These insurers failed to meet the MLR level because they overestimated the amount of money that would be spent to pay claims when the policies were priced. The MLR is designed to prevent insurers from capturing excessive profits.

Under New York law, the MLR requirement for commercial Medigap insurers is 65 percent for individual policies and 75 percent for group policies. For not-for-profit companies, the MLR requirement for both individual and group policies is 80 percent. Insurers must issue refunds when the cumulative loss ratio since inception of the policy (lifetime to date) is below the benchmark loss ratio.

The refund amounts, by company, are as follows:

• American Progressive Life and Health Insurance Company of New York: $968,075 to be distributed among approximately 650 policyholders
• Excellus Health Plan, Inc.: $314,979 to be distributed among approximately 427 policyholders
• First United American Life Insurance Company: $33,873 to be distributed among approximately 117 policyholders
• Transamerica Financial Life Insurance Company: $852,418 to be distributed among approximately 2,281 policyholders