Cigna Will Reimburse Connecticut for Insurance CommissionsBy Joseph B. Treaster
The New York Times
December 8, 2004
Cigna Health Care agreed yesterday to pay $870,388 to Connecticut as a result of what the state's attorney general called improper payments of insurance commissions over the last 14 years on dental coverage for state workers.
The money - reimbursement of commissions plus interest - was collected amid wide-ranging investigations into the insurance industry by attorneys general and state insurance regulators throughout the country. Richard Blumenthal, the Connecticut attorney general, said the money was not part of a settlement and that his investigation into Cigna Health Care and its parent, Cigna Corporation, was continuing.
"Cigna has not been relieved of any liability," Mr. Blumenthal said in an interview. The company is one of the largest sellers of employee benefits insurance in the country.
Mr. Blumenthal said Cigna came forward with information about the improper commissions after receiving subpoenas from his office in October and November. In a statement, Cigna referred to the commissions as "an administrative error" and said the agreement with the attorney general was not "a result of ongoing investigations" about improper insurance practices.
"There was no intentional misconduct on the part of Cigna or any past or present Cigna employees," the company said. Cigna said it had been requesting a meeting with state officials to discuss the costs of the dental coverage since March and moved swiftly to offer reimbursements after the inquiry started.
Beginning in 1990, Mr. Blumenthal said, Cigna began paying a commission of 1 percent of the cost of the dental coverage for state employees to Carl S. Feen, who worked as an agent for Cigna from 1964 to 1997. Mr. Feen now runs his own financial planning and employee benefits brokerage firm in New Haven.
Mr. Feen said there was nothing improper about the money he received from Cigna. "There's nothing illegal about it," he said. "It's done all the time." Many industry officials have taken a similar position, but Mr. Blumenthal and other investigators say such payments are improper because employers and employees are often not aware of them and they can add to the costs of coverage.
Mr. Blumenthal said that when Connecticut signed up with Cigna, it decided not to work through brokers to avoid commission costs. But Mr. Feen said state officials were aware, at least initially, that he had been paid for arranging the coverage by Cigna. The coverage was renewed every two years.
He said that in 1989, as a Cigna agent, he had begun urging state officials to buy coverage from Cigna. The next year, he said, the state had requested bids from several companies and had selected Cigna.
Mr. Feen said he had asked the state to pay him a commission for arranging the coverage. The state had refused, he said, and had told him he "should negotiate with Cigna to get paid by Cigna directly rather than it come out of state funds."
Mr. Feen said he had not been paid a commission but a "service fee." Mr. Blumenthal and Mr. Feen said the amount had been built into the cost of the coverage. As a result, Mr. Blumenthal said, the expense had been passed on to the state and its employees. Mr. Feen said there had been no extra cost to the state and its workers. Instead, he said, to win the state's business, Cigna had cut its prices and had further reduced its profits as it paid the fee to him.
Copyright 2004 The New York Times Company