Health plans subpoenaed in fraud probe

Questions over insurance brokers' fees and deals lead to investigations by state regulators.

By Robert Kazel, AMNews staff. Nov. 8, 2004.

A probe into alleged bid-rigging, backroom deals and kickbacks involving insurance broker fees, spearheaded by New York Attorney General Eliot Spitzer, sent many managed care stocks into a one-day nosedive in October and triggered numerous similar investigations by governments in other states.

Various health insurers confirmed receipt of subpoenas from Spitzer's office concerning potentially anticompetitive fees -- called contingent payments or commissions -- paid by some insurers to brokers that can sway brokers to steer customers' business to insurers that pay the fees.

Health and life insurance companies that have received subpoenas from Spitzer include Aetna Inc., CIGNA HealthCare, MetLife, Prudential and UnumProvident, a seller of disability coverage.

Aetna and CIGNA had received preliminary subpoenas about contingent fees last spring.

The brouhaha set off by Spitzer's newest offensive caused a sell-off of managed care stocks Oct. 18. Shares of Aetna were off 12% to $86.17. CIGNA dipped 10%, to $59.73. WellPoint Health Networks, Humana and UnitedHealth Group also saw sharp declines. However, the companies' stock prices stabilized after a day.

The investigation into the health insurance industry was a widening of Spitzer's probe of the property and casualty insurance field, which culminated with a Oct. 14 civil lawsuit against Marsh & McLennan, the biggest property and casualty insurance broker in the United States. Marsh & McLennan is accused of supplementing brokers' commissions with contingent fees as well as rigging the supposedly competitive bid process by purposefully soliciting overpriced insurer bids so that companies with which they had sweet deals would appear better by comparison.