An insurance company owned by BlueCross BlueShield of South Carolina has been ordered to pay a $1.8 million settlement in Vermont after regulators found it was selling inadequate health coverage policies to college students.
The Department of Financial Regulation announced it had reached its largest settlement ever with Columbia-based Companion Life on Dec. 3.
The BlueCross BlueShield subsidiary offered health insurance to about 2,500 students at 10 colleges and universities in the Green Mountain State without approval from Vermont regulators.
The Department of Financial Regulation said in a statement that the plans would not have been approved because they don't comply with rules laid out in the Affordable Care Act that require all medical plans on the market to cover certain health benefits, such as health screenings and mental health and substance abuse treatments.
Several hundred claims were wrongly denied as a result.
The colleges bought bundled plans from Companion Life Insurance Co., which then showed up as a single line item in tuition bills. Students could opt out of the coverage by showing proof of other insurance during a waiver period, but they had no option to leave the plan or get a refund after the deadline.
The settlement payment includes $481,000 in restitution to 212 students whose claims were denied and a $950,000 penalty to the state.
The company sells life, health and accident insurance in South Carolina and collected roughly $40 million from residents in premiums in 2018, according to the S.C. Department of Insurance.
Ray Farmer, the state's chief insurance regulator, said he couldn't comment on the Vermont matter or say whether the company is being investigated in South Carolina.
A spokeswoman for BlueCross BlueShield of South Carolina declined to comment on the settlement Tuesday, but she said Companion Life no longer sells student plans. Farmer said student plans from Companion Life had been sold in South Carolina in years past.
A settlement agreement signed by John Wilbur, Companion Life's president, stated the company alleged the plans' lack of approval was due to errors on the part of employees.
"When the company learned of the unapproved rates and forms, it worked diligently with the department to receive approval" for the student health insurance plans, in 2016, according to the settlement.
Companion Life has operated from Columbia since 1971, according to its website. It offered student health insurance plans in Vermont from 2011 to 2017. Along with denying students coverage it should have paid, Companion Life also failed to "supervise its business partners" and used brochures and other marketing materials that were misleading, the Vermont settlement states.
“This significant penalty sends a strong and simple message to financial service companies that failure to comply with Vermont’s consumer protection laws will have firm consequences," Michael Pieciak, commissioner of the Vermont Department of Financial Regulation, said in a written statement.