Widow Settles Fraud Case Against Health Insurer for $1.7 Million.
LOS ANGELES (Jan. 19, 2005)--The Mega Life and Health Insurance Company, one of the nation’s leading providers of “Association Health Plans,” has agreed to pay $1.71 million to settle a civil lawsuit alleging that it fraudulently misrepresents policy coverage.
The case arose out of the experience of Dana and Doug Christensen, a Marina del Rey, Calif. couple, who were sold Mega’s primary insurance product, “The Health Choice Benefit Plan,” in January, 2001.
Three months after the policy was issued, Doug Christensen was diagnosed with metastatic cancer and began medical treatment. He died of his illness in October of 2002, leaving his widow with more than a half million dollars of uncovered and unpaid medical expenses.
Christensen underwent periodic chemotherapy and two surgeries for 18 months following the diagnosis of cancer. The chemotherapy alone cost more than $300,000, but the Mega policy covered only $29,000.
“The bottom line,” said the Christensens’ attorney, Antony Stuart, “is that if this health insurance policy was honestly presented to prospective customers, nobody would ever buy it.”
Mega’s “Health Choice Benefit Plan” is described as a “group policy,” and is only sold through the National Association for the Self-Employed (NASE), also a defendant in the case. Mega regularly advertises its ability to provide “affordable health insurance” in radio ads featuring popular television personality and former pro football player Merlin Olson; and in cable television commercials.
The NASE claims to be an independent, non-profit association dedicated to serve the interests of self-employed individuals and small business owners. However, in the Christensens' suit, Stuart was prepared to prove that the NASE was established in 1983 by Ronald Jensen, Chairman of the Board of UICI, the holding company of Mega, for the purpose of marketing insurance.
Stuart alleged that Jensen has maintained control over the NASE through his adult children who operate another company which contracts with the NASE to manage and operate it.
“UICI’s control of the NASE through the Jensen family insures two critical aspects of a fraudulent marketing scheme,” said Stuart. “First, the presentation of the Health Choice Benefit Plan as a product endorsed or supported by a national non-profit association gives credibility to the insurance policy. Second, the company’s control of the Association enables it to raise premiums at will and circumvent state rate regulations.”
UICI is a publicly held corporation (New York Stock Exchange: UCI) that represents itself as primarily offering health insurance policies to the self-employed.
The Christensen settlement is the only one known for a market fraud case against a UICI insurance company. Though there have been several other such cases brought, all settlements have been subject to strict secrecy agreements.
“Dana Christensen was motivated by principle, not by money,” said Stuart. “She could have recovered much more money, but she knew that would come with a requirement of confidentiality. She wants the public to know about this scam.”
The case, Christensen v. The Mega Life and Health Insurance Company and The National Association for the Self-Employed (L.A.S.C. Case No. BC 295 972) was scheduled to begin trial in the Los Angeles Superior Court in late February.