Superior Court Orders $165 Million In Restitution And Penalties For Insurance sale violations

Penalties Imposed For Violating Consent Decree and Chapter 93A

The Suffolk Superior Court has ordered three UnitedHealth Group subsidiaries to pay over $165 million in restitution and civil penalties for violating a consent judgment and Chapter 93A. The December 31, 2024, order by Judge Hélène Kazanjian follows a sixteen-day trial on damages and penalties, concluding a case that began with a 2020 contempt complaint.

The 2020 enforcement action filed by then-Attorney General Maura Healey against HealthMarkets, Inc., The Chesapeake Life Insurance Company, HealthMarkets Insurance Agency, and various subsidiaries accused the defendant companies of deceiving over 15,000 Massachusetts consumers into buying supplemental health insurance instead of major medical coverage. The contempt complaint also alleged the defendants misrepresented their agents as “objective, failed to disclose sales meeting purposes, and used deceptive sales tactics, continuing the same unlawful sales tactics barred by a 2009 consent judgment with the Attorney General.

In April 2022, Judge Brian A. Davis granted the Attorney General summary judgment on liability, finding the companies violated both a 2009 consent judgment and the Massachusetts Consumer Protection Act.

Judge Davis determined that the companies had deceived consumers about their sales agents’ roles and the insurance products they sold. The court found the defendants falsely claimed their agents were objective and represented all insurance carriers. The agents bundled supplemental health insurance with major medical coverage, providing quotes that combined premiums without proper disclosure.

Between 2011 and 2019, Chesapeake had received close to a thousand consumer complaints. In May 2017, sixty percent of the Massachusetts complaints tracked by a subsidiary of HealthMarkets came from consumers who did not know their supplemental insurance was separate from major medical coverage.

Background and Context

The roots of the 2020 contempt complaint and the December 2024 mega-judgement trace to 2009, when HealthMarkets and two subsidiaries entered into a consent judgment with Massachusetts requiring payment of $15 million. That judgment resolved allegations of deceptive health insurance marketing practices, including misleading consumers about association memberships and coverage limitations.

The 2009 judgment imposed specific restrictions on HealthMarkets and its subsidiaries. These included a ban on offering Health Benefit Plans in Massachusetts for at least five years and permanent injunctions against deceptive advertising. The judgment prohibited marketing practices such as making incomplete insurance comparisons, using the phrase “any doctor” without disclosing limitations, and requiring association memberships for individual health plans.

After the 2009 judgment, HealthMarkets altered its business model. The company shifted from underwriting major medical insurance to distributing third-party products and marketing supplemental health insurance. In 2010, HealthMarkets created Insphere Insurance Solutions (later renamed HealthMarkets Insurance Agency) to handle sales. Insphere retained many agents and managers from the prior operation that had triggered the 2009 consent judgment.

The Chesapeake Life Insurance Company, another HealthMarkets subsidiary, began selling supplemental health products in Massachusetts in 2011. These included specified disease insurance, hospital confinement coverage, and accident-only policies. Between 2011 and 2018, Chesapeake sold over 58,000 supplemental health policies to Massachusetts residents.

The corporate structure placed all three defendants – HealthMarkets, Chesapeake, and HealthMarkets Insurance Agency – under common control. Kenneth Fasola served as President, CEO, and Director of all three companies from 2011 to 2019. The companies shared officers and facilities, operating from the same address in North Richland Hills, Texas. In 2019, UnitedHealth Group acquired the companies.

HealthMarkets described Chesapeake on its website as “our supplemental business” and marketed itself as a “leading health insurance marketplace.” Insphere began doing business as “HealthMarkets” in 2013, formally changing its name to HealthMarkets Insurance Agency in 2017. This name change leveraged similarities with the federally labeled marketplace exchange for Obamacare, creating potential consumer confusion about the company’s role in health insurance distribution.

This corporate evolution and marketing approach laid the groundwork for practices that would eventually trigger the 2020 contempt action and lead to the court’s 2024 order for $165 million in restitution and penalties.

Key Violations Found by Court

Deceptive Marketing Practices

The Superior Court’s summary judgment findings, issued by Judge Davis in April 2022, identified multiple violations of both the 2009 consent judgment and state consumer protection laws. HealthMarkets and its subsidiaries misrepresented their agents’ roles through television, radio, internet advertising, and direct consumer communications.

The companies marketed their agents as “impartial,” “objective,” and “unbiased” while compensating them for selling Chesapeake supplemental health insurance. The court found these agents did not represent all carriers and received higher commission rates for selling Chesapeake products than for major medical insurance. Agents used titles like “insurance advisor,” “insurance specialist,” and “licensed benefits consultant” without holding required Massachusetts insurance adviser licenses.

The companies sent automated emails to 114,000 Massachusetts residents claiming their agents could offer “a wide variety of options from several highly rated companies.” The court determined this misrepresented the limited range of products agents promoted and their financial incentives to sell Chesapeake policies.

Product Bundling Issues

The court identified systematic deception in how agents combined major medical and supplemental health insurance products. Agents presented insurance packages with single premium totals that masked individual policy costs. The companies trained agents to hide Chesapeake’s name from marketing materials and refer to supplemental coverage as “benefits” of major medical plans.

HealthMarkets created software tools that generated customer quotes showing combined premiums without breaking down costs by policy. The companies instructed agents to present total package prices first, allowing discussion of individual policy costs only if consumers raised specific questions.

Between 2011 and 2018, over 500 Massachusetts consumers filed complaints stating they did not know they had purchased Chesapeake supplemental policies. Many consumers believed the supplemental coverage was part of their major medical insurance plan. The companies tracked these “unaware of coverage” complaints but continued their bundling practices.

The court found the companies targeted vulnerable consumers who qualified for MassHealth or subsidized coverage through the Massachusetts Health Connector. Agents misrepresented premium costs by combining charges for supplemental policies with zero-premium MassHealth coverage. Training materials directed agents to market supplemental policies to “the poor” and taught that “no one is too poor or too sick.”

The companies’ internal communications acknowledged problems with their marketing approach. In 2015, a HealthMarkets manager noted that documents bundling supplemental insurance with “no reference to Chesapeake or these plans being optional” should not be used. Yet the practice continued into 2018.

Judge Davis determined these violations reflected intentional corporate policies rather than isolated agent misconduct. The companies created training programs, sales scripts, and marketing materials designed to obscure the distinction between major medical and supplemental coverage. This systematic approach to bundling products led Judge Kazanjian to characterize the violations as “particularly egregious” in her damages assessment.

Specific Insurance Product Issues

Supplemental Health Insurance

The court focused on Chesapeake’s specified disease insurance, marketed under the name “Critical Illness” coverage, as a primary source of consumer deception. This product paid lump sums for eleven specific conditions but excluded many life-threatening illnesses such as multiple sclerosis, diabetes, and meningitis.

Between 2011 and 2018, Chesapeake collected over $18 million in premiums from the sale of more than 16,000 specified disease policies to Massachusetts residents. The policies showed loss ratios under 27 percent, compared to the 88 percent minimum required for major medical insurance.

The court highlighted marketing practices that obscured the limited scope of specified disease coverage. Agents described these policies as protection for “any major illness” despite the narrow list of covered conditions. Some agents used stories about consumers with uncovered conditions to sell the policies.

Chesapeake’s hospital confinement and accident-only health insurance showed similar patterns of misrepresentation. Agents marketed hospital coverage as paying for “any hospitalization” without disclosing exclusions for mental health treatment and normal pregnancy. The policies showed loss ratios below 23 percent.

Short-Term Health Insurance

From August 2015 to May 2016, Chesapeake agents sold 267 short-term health insurance policies from Unified Life Insurance Company to Massachusetts residents. These sales generated $112,780 in commissions but violated state requirements for policy filing and approval.

The agents marketed these short-term plans as covering “any doctor” without disclosing the exclusion of behavioral health services. Health Insurance Innovation, the plan administrator, informed HealthMarkets in May 2016 that the product lacked state approval for sale in Massachusetts.

Sales to MassHealth-Eligible Consumers

The companies directed agents to sell supplemental policies to consumers eligible for MassHealth despite federal rules requiring Medicaid beneficiaries to assign insurance benefits to the state. Internal documents from 2015 acknowledged this conflict but were never distributed to agents.

Training materials described MassHealth-eligible consumers as “the sweet spot” for supplemental insurance sales. Agents hid consumers’ MassHealth eligibility to facilitate supplemental policy sales, combining premium quotes to suggest MassHealth required payment.

Financial Impact on Consumers

The court found Chesapeake’s supplemental health insurance provided minimal value to Massachusetts consumers. The company’s disability income insurance showed loss ratios below 9 percent, while accident-only coverage paid less than 5 percent of premiums in benefits.

Through 2018, Chesapeake collected and retained over $3.2 million from policies sold by its highest-complaint agent. Five other agents generated between $938,000 and $2.5 million each in retained premiums, with complaint ratios exceeding 7 percent of their sales and, in one case, reaching 12% of sales.

The court determined these products served primarily as revenue sources for the companies and their agents rather than meaningful insurance protection. Judge Kazanjian cited these low loss ratios and high retention rates as factors in assessing damages and penalties.

Sales Practice Violations

Agent Training and Supervision

The court identified systematic training practices designed to mislead consumers about supplemental insurance products. HealthMarkets provided agents with scripts that misrepresented their role and the nature of insurance coverage. The companies trained agents to describe themselves as “licensed benefits consultants” without required Massachusetts adviser licenses.

Training materials instructed agents to bundle major medical and supplemental coverage into single premium quotes. A 2013 training document directed agents to “group them as one total price” because quoting separate prices decreased supplemental insurance sales.

The companies created a “three-option close sheet” template that combined major medical and supplemental premiums. This marketing tool showed consumers total package prices while reserving detailed premium breakdowns for agent-only views. Agents received training to present these bundled options as complete health protection packages.

Management Response to Complaints

HealthMarkets tracked consumer complaints about unauthorized or misunderstood supplemental insurance purchases but took limited corrective action. The company identified a trend of “unaware of coverage” complaints yet continued training agents in practices that generated these complaints.

In October 2016, sales managers reported concerns about deceptive practices to company executives. Internal communications described “disturbing accusations by clients” becoming “more frequent,” but the companies maintained their marketing approach through 2018.

The court found the companies failed to discipline agents despite mounting evidence of misconduct. One agent accumulated forty consumer complaints without suspension or monetary penalties. Another agent generated thirteen complaints in his first six months of sales.

Target Marketing Concerns

Company training materials directed agents to focus on “the poor” and Medicaid-eligible consumers as prime targets for supplemental insurance sales. The companies trained agents to hide subsidy eligibility information until after obtaining consumer budget figures.

Agents received instructions to present supplemental insurance as part of “packages” to MassHealth-eligible consumers. This practice created false impressions about coverage costs for consumers qualifying for zero-premium public insurance.

Compensation Structure

The companies structured agent compensation to promote supplemental insurance sales. First-year commission rates ranged from 46 to 65 percent for Chesapeake’s specified disease and disability products. These rates exceeded commissions for major medical insurance.

Agent compensation tiers depended on weighted commission factors that favored supplemental insurance sales. The companies provided stock in HealthMarkets as additional compensation for high-producing agents between 2011 and 2018.

Compliance Oversight Failures

Despite a 2009 consent judgment requiring enhanced oversight, the companies maintained weak compliance controls. They failed to audit Massachusetts agents or review marketing materials for regulatory compliance. The companies ignored evidence that agents used unapproved marketing materials and assumed business names.

The court found this pattern of weak oversight reflected corporate priorities focused on sales over consumer protection. Judge Kazanjian cited these systematic compliance failures in assessing civil penalties against the companies.

Financial Impact and Remedies

Restitution Order

Judge Kazanjian ordered the defendants to pay $50,095,562.07 in restitution to Massachusetts consumers who purchased supplemental insurance between 2011 and 2020. The amount represents net premiums collected after refunds, minus $5.5 million in claims paid to over 500 consumers.

The court based its restitution calculation on Chesapeake’s receipts for supplemental health policies sold through both Insphere and Simpson Financial Group agents. The order includes $112,780 in restitution for commissions from unauthorized Unified Life short-term insurance sales.

Restitution and Civil Penalties totaling $165,237,562.07

The court imposed $115,142,000 in civil penalties, reflecting multiple categories of violations. The penalties address deceptive bundling practices affecting 43,974 supplemental policies sold between 2012 and 2016.

For the period 2012-2016, when both bundling and carrier misrepresentation occurred, the court assessed $2,000 per policy, totaling $87,948,000. Sales from 2017-2018 drew penalties of $1,000 per policy, adding $13,019,000.

The court levied additional penalties for specific marketing violations:

$11,400,000 for sending 114,000 deceptive automated emails at $100 per email

$2,775,000 for false statements on agent websites viewed 5,550 times at $500 per view.

In total, the court ordered the defendants to pay in restitution and penalties $165,237,562.07

Further proceedings, a possible appeal, or even a settlement

Attorney fees and injunctive relief

Judge Kazanjian’s final orders were for the Attorney General to file a fee petition for an award of her reasonable costs of investigation and attorney’s fees within forty-five days. The defendants must file their opposition within 30 days of receiving the Commonwealth’s petition for costs and attorney fees.

The order requires the parties to submit separate briefings on injunctive relief, not to exceed ten pages, within forty-five days. After receiving all the briefings, the clerk will schedule a hearing on both the costs and fees petition and injunctive relief.

Appeal

Once the court disposes of the issues of investigation costs, attorney fees, and injunctive relief, the court will enter a final judgment.

The defendants will have thirty (30) days after the entry of that judgment to file a notice of appeal.

Settlement

Another possibility is that HealthMarkets’s parent company since 2019, UnitedHealth Group, may decide to settle.

While the $165 million order against the HealthMarkets defendants is the largest such award in Massachusetts history, it is not a significant amount to HealthMarkets’ parent company. UnitedHealth Group projected in December 2024 that it would have sales in 2025 between $450 billion and $455 billion.

Presently, UnitedHealth Group is dealing with the December 4, 2024 murder of its UnitedHealthcare subsidiary’s CEO, Brian Thompson, which engendered widespread negative commentary reflecting frustrations with health insurance companies in general and United Healthcare in particular. UnitedHealth Group could opt to settle to avoid further negative publicity resulting from the Superior Court’s finding that another of its subsidiaries systematically ripped off consumers with deceptive marketing of overpriced minimum benefit policies.

Agency Checklists will keep its readers posted

A copy of Judge Kazanjian’s 48-page decision is available below: