UnitedHealth Group ordered to pay $165 million over deceptive sales practices

UnitedHealth Group will appeal an order to pay $165 million in penalties and restitution after a judge found a business acquired by the Eden Prairie-based insurer more than five years ago used deceptive practices to sell benefits that supplement traditional health insurance in Massachusetts.

The judge’s order, announced this month by the attorney general in Massachusetts, was issued in late December.

The case dealt with allegations of cheating consumers and violating consumer protection laws primarily during the years leading up to 2019, when UnitedHealth Group purchased a Texas-based company called HealthMarkets Inc. At the time, divisions of the acquired company were being investigated by regulators in Massachusetts.

“For years, the defendants preyed on financially vulnerable individuals, deceiving them into buying products they didn’t need or couldn’t afford,” Attorney General Andrea Joy Campbell said in a statement. “This order holds the companies accountable and will provide meaningful restitution to consumers.”

UnitedHealth Group said it would appeal the decision.

“We disagree with the Massachusetts court’s latest ruling in the litigation involving the HealthMarkets companies,” the company said in a statement. “The fundamental errors in this ruling compound those already made by the trial court earlier in this case and have resulted in a decision that is clearly unsupported by the evidence and contrary to established Massachusetts law.”

The case dealt with what are known as “supplemental” health plans, where patients receive a lump sum of money if they suffer certain triggering health problems.

These policies sometimes are known as “dread disease” coverage, with names like “cancer-only” or “critical illness,” where patients with certain major medical issues receive cash payouts they can use for any purpose. The benefits are distinct from health insurance policies that cover the cost of medical and hospital services and are the mainstay at UnitedHealthcare, the massive health benefits division at UnitedHealth Group.

Judge Helene Kazanjian of Suffolk Superior Court ordered $115.1 million in civil penalties for false and deceptive advertising practices at the HealthMarkets companies, including one division called Chesapeake.

The judge found evidence that beginning in 2012 and continuing through 2016, if not later, the company bundled supplemental health plans with traditional insurance coverage so clients didn’t know they were buying the supplemental coverage.

“Agents used marketing materials that showed consumers a single premium for a combination of major medical and supplemental policies, hid the name Chesapeake from consumers and ... bundled policies together with a single quote,” the judge wrote. “Agents were trained to hide the costs for the individual policies so customers did not understand what they were purchasing.”

Civil penalties also were warranted, the judge wrote, for company web pages with false representations that agents provided objective guidance. She found the company also sent an automated email deceptively, asserting that agents could offer a wide variety of options from numerous companies.

Kazanjian ordered about $50.1 million in restitution to customers who purchased supplemental health policies between 2011 and November 2020.

Supplemental health plans have been controversial over the years, with critics saying they pay out a much lower share of premiums to consumers than regulations require of traditional health insurers.

In her order, Kazanjian quoted a health economist and expert witness for the defense who testified that consumers benefit from these health plans not solely due to claims they actually receive, but also from “the peace of mind from knowing that they will be financially covered if a triggering event occurs.”

The economist conceded, however, “that a consumer is not likely to receive peace of mind from a product that they unknowingly purchased,” the judge wrote.