Mass. AG Probes Municipal Health Insurance Buying

January 11, 2005

The Massachusetts attorney general is expanding his probe into the commissions that insurers pay insurance brokers who promote their products to include contracts with cities and towns.

The investigation by Attorney General Tom Reilly, which had previously been focused on the private sector, is looking at a practice in which insurers offer incentives — sometimes reaching hundreds of thousands of dollars — to brokers who place their products with employers.

Reilly sent a letter this week to an undisclosed number of cities and towns, saying his office was “reviewing allegations that certain insurance consultants and brokers may have violated contracts with cities and municipalities regarding the selection of insurance products.”

Brokers are required to provide objective information to employers on what type of health, life, property and casualty insurance to buy. Cities and towns are large buyers of insurance because they employ so many people, and many are also short on cash.

“As part of the process of obtaining bids and recommending insurance products for your purchase, these brokers/consultants may have accepted contingent commissions or other incentives from insurers that created a conflict of interest,” said the letter, which was obtained by The Boston Globe.

Reilly’s spokeswoman, Sarah Nathan, declined to comment on why the investigation had been expanded to include cities and towns.

Some brokers have said the bonuses are too small to influence decisions and that because all insurers offer them, brokers are not pulled toward one insurer over another.

In November, the Globe obtained copies of some health insurer bonus programs. They showed the state’s largest health insurers — including Blue Cross and Blue Shield of Massachusetts, Tufts Health Plan, and Harvard Pilgrim Health Care — pay brokers significant bonuses and even offer trips to those who find buyers for their health care plans.

Tufts and Blue Cross said they are reviewing their bonus programs. Harvard Pilgrim Health Care already had planned to do so.

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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