New York State



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Kermitt J. Brooks    Acting Superintendent of Insurance    25 Beaver Street  New York, N.Y. 10004



Health Insurer Fined $700,000 for Misleading Sales Practices; Insurance Department Blocks Sale of Limited Benefit Health Plan

Governor David A. Paterson announced today that New York is cracking down on companies that sell limited benefit health insurance plans in ways that mislead people into believing they have full heath insurance coverage. As a result, the New York State Insurance Department has moved to protect New Yorkers by stopping one company from selling the product in New York and from advertising nationally and is examining the marketing practices of all companies selling this product.

"Many New Yorkers are desperate for affordable health insurance. More than 2.5 million have no 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 into believing they are getting full coverage. If they get seriously ill, consumers who buy this product can find themselves with huge bills they are unable to pay. New York will not allow disreputable businesses to take advantage of consumers," Governor Paterson said.

"At Governor Paterson's direction, the Insurance Department has taken a number of steps to protect consumers," Acting New York State Insurance Superintendent Kermitt J. Brooks said. "Especially in this economic climate, we will not allow consumers to be twice victimized - first by paying for insurance that covers much less than they were told it would, then by having to pay thousands more for the health care that insurance did not cover."

Governor Paterson announced the Department fined one company, American Medical and Life Insurance Company (AMLI), $700,000 for numerous violations, and imposed new 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. The commercial was the company's main marketing tool.

"We are working to help AMLI customers and we urge anyone who has had a problem to call the Insurance Department so that we can help," Brooks said, noting that the company is now cooperating with the Department.

Brooks said AMLI agreed to:

Limited benefit health insurance plans normally provide less than comprehensive hospital/medical coverage, but with healthcare bills being the leading cause of personal bankruptcy filings nationally, many consumers searching for affordable coverage buy limited benefit health plans as one way to insure against potential liability. Limited benefit health plans may leave consumers with large medical bills. If injury or illness occurs and an insured files a claim, they may find that they have less coverage than they thought (see Appendix A for comparisons).

A sampling of complaints received by the Insurance Department about AMLI's coverage illustrates this gap:

The actions against AMLI were triggered by an Insurance Department investigation begun after consumers complained to the Department, Brooks said:

Governor Paterson announced further Insurance Department action:

In addition to the limitations inherent in these policies, marketing and sales practices surrounding them may add to the confusion, Brooks said. Many limited benefit plans are solicited via the Internet and through television commercials. Some of these advertisements imply the policies provide comprehensive or major medical coverage. Exclusions and policy limits are not completely revealed. The sales are completed via the Internet or telephone without the benefit of a written application, circumventing specific disclosures that are required by New York Law. The mandatory disclosures are either not provided, are not prominently displayed or are lost during the sales pitch and thus are ineffective. Investigations have also revealed that some policies are sold through telemarketing firms using unlicensed agents, which is in violation of New York Insurance Law.

"We will hold hearings to look at the larger issues surrounding limited benefit health plans," Brooks said. "Are they being sold properly? Should they be sold at all? What else can we do to protect New Yorkers? We want to hear what the public thinks about these plans."

Hearings are scheduled for September 21 in New York City, September 24 in Newburgh and September 30 in Rochester. More information on the hearings, including how to testify, is available at the Insurance Department's website at

Consumers with insurance questions or concerns can call the Insurance Department's consumer hotline at 1-800-342-3736. The hotline is open from 9 a.m. to 4:30 p.m. Monday through Friday. Consumers may also ask questions or file complaints at the Insurance Department's website,




ServicesNew York State Average CostAmerican Medical and Life Insurance: National Congress of Employers Group Plan Coverage

Hospital Room & Board

$5,516- average daily charge
(*Includes insured & self insured data & excludes Medicare and Medicaid)

$1,000 / day
(max. 30 days)

Diagnostic Tests-High tech (MRI, PET, CT, etc.)

$1150-$2500 (MRI)
$500-$1250 (CT Scan)
$850-$4200 (PET Scan)
(* and

$100 per day
(max. 3 test days/yr)

Diagnostic Tests-Low tech (x-ray, lab, etc.)

$83-$1,100 per test

Included in above

Doctor’s Office Visit

$45-$150 (minor problems)
$84-$185 (low to moderate severity)
$130-$250 (moderate to high severity)
$200-$355 (moderate to high severity, more complex)
$373-$550 (moderate to high severity, highly complex)
(* Taken from The Attorney General’s Report “The Consumer Reimbursement System is Code Blue” (2009)) 

$100 per visit (max. 5 visits/yr)



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