26 ‘Medigap’ Insurers Face State Hearings

The state Insurance Department has summoned another 26 sellers of Medicare supplemental insurance to show cause why they should not be barred from doing business in California for engaging in allegedly unfair and deceptive sales practices.

Insurance Commissioner Roxani Gillespie, noting that two groups have already been ordered to cease doing business in the state, said the new round of hearings will be held in San Francisco Tuesday through Dec. 12.

The two groups already prohibited from selling the supplementary policies are the National Assn. of Retired Persons, headquartered in Dallas, and the San Jose-based California Assn. for Concerned Senior Citizens. The 26 parties summoned to the new round of hearings were not identified but include both groups and individuals.

The hearings are part of a widening crackdown on companies and groups that have tried to peddle more insurance to the elderly than they need to meet bills that Medicare does not pay. Some people have been induced to purchase several policies when, under the rules, often only one policy would pay.

Gillespie has been acting partly in response to formal complaints made by the Consumers Union and partly as a result of inquiries she ordered undertaken last summer.

The commissioner also announced that she will hold a series of public hearings early next year to investigate sales practices for this type of insurance. She said the hearings will help determine what, if any, changes are needed in existing laws.

Biased Approach

Meanwhile, in a formal response to the complaints of the Consumers Union, Gillespie charged that the group’s “overall approach . . . is biased” against all forms of Medicare supplemental insurance when, in fact, some such sales are merited.

“It must be accepted that as long as Medicare and alternative health care delivery systems fail to provide complete and comprehensive health care coverage, there will be a need for the private sector to develop, refine and market products which fill the ‘medigap,’ ” Gillespie wrote in a 15-page letter to Carl Oshiro, an official of the group.

“Instead of discouraging the development and sale of Medicare supplement and other related products, which would be the result of Consumers Union’s negative proposals in this area, insurers should be encouraged to develop and market, in a competitive environment, products that meet the needs of consumers.”

Oshiro said that Consumers Union is puzzled by Gillespie’s comments, particularly since she appears to be moving toward taking many of the disciplinary actions requested by his group. The organization has had a number fractious exchanges in recent months with Gov. George Deukmejian and officials of his Administration, accusing them of being inattentive to consumer concerns.

In responding to the Consumers Union petition of complaint, Gillespie granted, at least in part, its requests that sales promotions to senior citizens contain warnings that they should check with competent authorities as to the kinds of supplementary insurance they should buy.

But she declined to comply with requests that the sellers be required to tell buyers what percentage of their premium dollars might be expected to actually be paid out to claimants. She explained this might be misleading because there are other substantial costs to insurers besides claims paid.

The commissioner has appealed for elderly persons victimized by deceptive practices to contact the Insurance Department. “We have a feeling that many seniors still hesitate to ask for help. The department only receives about 100 consumer complaints a year on supplemental health insurance, compared to thousands on auto or homeowners insurance,” she said.

The department can be contacted through its toll-free consumer hot line, 800-233-9045.