The Colorado Division of Insurance has gotten more aggressive in the past two years, examining more companies and levying higher fines for violations.
The approach has added more than $1.5 million to the state’s general fund, returned $3.1 million to Colorado consumers in the form of rebates and led to a recent agreement by Anthem Insurance to either credit or repay $20 million to its premium holders.
In short, it’s hitting insurance companies where it hurts most — their bottom lines.
Insurance Commissioner Marcy Morrison offers no apologies.
“I was appointed by the (Bill) Ritter administration to be a strong consumer advocate — and that’s what I’m doing,” she said.
Morrison’s strength comes partly from legislation passed two years ago that allows her division to fine insurance companies up to $300,000 every six months. The previous limit was $150,000.
Also, it’s Morrison’s belief that protecting consumers is the main role of a regulatory authority like the Division of Insurance.
The extra scrutiny means insurance companies — including those in the auto, health, property, bail bonds business — are increasingly subject to what the industry refers to as market-conduct exams. These are checks by auditors and actuaries to make sure their paperwork is order, polices follow state law and that rates are fair.
Anthem underwent a seven-month market review that led to a $20 million payback, while keeping current premiums in place. While declining to discuss the process itself, Anthem officials said they settled the case in order “to put the review process behind them.”
Anthem wasn’t admitting fault or wrongdoing.
“We just needed to focus on day-to-day business,” said spokeswoman Joyzelle Davis. “Anthem is confident that its rates are appropriate. The DOI did not levy any fine against Anthem as a result of the market exam.”
Aetna Insurance, on the other hand, was fined $642,000 earlier this year and said it had “made mistakes” during the period examined, which covered Aetna policies issued in 2008.
Its admission, however, didn’t mean it was happy with Morrison’s office.
“While we do accept the findings, we believe the fines are excessive,” said spokeswoman Anje Coplin. “We made repeated attempts to contact the insurance commissioner and are disappointed that she was unwilling to meet with us to discuss our concerns.”
Aetna has corrected the mistakes, she added.
Morrison said she never meets with companies when her agency’s market-conduct exams results in a fine. She isn’t being unreasonable, she said, but she finds such encounters unwise.
“I did it once, with another company, and they used it in a brief in court to override the fine,” she said. “We won the case, but after that, I decided not to meet with them when it reaches that stage. I know they were upset.”
Morrison said the division doesn’t always fine companies when it finds mistakes.
“We just worked with one company that agreed to fix everything within 60 days,” she said. “So we didn’t fine them. It’s not a knee-jerk kind of thing.”
Morrison also said the division does not randomly choose companies to audit. Instead, it takes a deeper look at the companies that have the highest number of complaints.
That look can take the form of a self-audit, which requires a company to supply extra paperwork to the division, or it can be a more in-depth market review, which can take months and include visits by regulators to company offices.
“We can look at three months, six months, nine months,” Morrison said. “And of course, the process can take even longer than that. We have to make sure we’re being thorough.”
The more aggressive approach by the division has left many insurance companies hesitant to criticize it publicly.
Many companies refused to speak on the record about the commission and its policies. Privately, they said the vast amount of paperwork generated by a market exam takes months to complete. Others complained the division gave them very little time to gather the requested information.
Morrison said she isn’t bothered by the complaints from insurance companies. She’s concerned about Colorado consumers and their treatment at the hands of insurance companies.
“We’re regulators, and our job is to make sure that the policies and paperwork are as right as they can be,” she said. “It’s as simple as that. We do these exams because we saw a need to do them. We were seeing more mistakes, hearing more complaints.”
A more competitive marketplace also created the need for more exams, she said. She doesn’t view the exams as a negative — even for the insurance companies.
“They’ll say the fines are too high,” she said. “But really, this is a very healthy exercise for consumers and for the companies. They make sure they have all their ducks in a row. It’s very important, particularly for large insurance companies that have thousands of clients.”
Today’s climate is going to mean insurance companies will need to be more transparent about their premiums and how they make decisions, she said.
“People are paying a lot of money for these policies,” she said. “They want to know exactly what they’re getting. They want a place for questions. They want the information in ways they can understand.”
“Insurance companies are going to have to adapt to that.”
They won’t, however, have to deal with Morrison for much longer.
Morrison is wrapping up her term as insurance commissioner and will leave office with the Ritter administration.
She’s got at least one more big battle ahead — dealing with insurers that are threatening to pull out of the child-only individual market because health care reforms prohibit denying insurance based on pre-existing conditions.
Morrison is optimistic a solution will be found.
“Some companies don’t want to pull out of the market, but they also don’t want to handle all the risk alone,” she said. “We’ll find a resolution.”