N.J. Charges Health Insurer with Alleged Steering of Small Businesses

May 21, 2007

The New Jersey Department of Banking and Insurance (DOBI) has filed an administrative order alleging CIGNA HealthCare of New Jersey and an affiliate, Connecticut General Life Insurance Co., failed to properly notify 2,123 small businesses of their health plan options, instead steering them into products with substantially reduced benefits.

DOBI Commissioner Steven M. Goldman signed the order May 1 requiring CIGNA and CGL to restore coverage and benefits to the degree they would have existed had employers been properly advised of options and plan choices, and pay a fine of $500 per violation, for a total of $2.123 million.

“Providing employee health insurance is challenging enough for small businesses without the added obstacle of insurance providers withholding information,” Goldman said. “Through this action, thousands of New Jersey residents will see their benefits properly restored, and insurers will be put on notice that disregard for the law will not be tolerated.”

In 2006, CIGNA applied to DOBI to withdraw 35 optional benefit riders used with the standard health maintenance (HMO) plan, according to DOBI. The application included a draft employer notice of non-renewal of the riders, along with a statement that CIGNA would continue to offer the state-mandated HMO plans. The actual notice sent to employers, however, deleted that notification, officials said.

Instead, DOBI alleges, CIGNA encouraged employers to enroll in a CGL plan – but failed to explain a significant reduction in benefits. Most notable is that the CGL plan limits home health services to 60 days per year and limits coverage of durable medical equipment to $1,000 per year; the state-mandated plan does not limit coverage in either instance.

CIGNA and CGL have 30 days to request an administrative hearing objecting to the order. If no hearing is requested, the order will then become final.

Source: N.J. Department of Business Insurance

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