By Nate Raymond
BOSTON, Jan 6 (Reuters) - Three UnitedHealth-owned UNH.N insurance companies collectively must pay over $165 million for engaging in widespread deceptive conduct that misled thousands of consumers in Massachusetts into unknowingly buying supplemental health insurance, a state court judge has ruled.
Massachusetts Attorney General Andrea Campbell on Monday hailed Suffolk County Superior Court Judge Helene Kazanjian's decision, saying it awarded the state the largest civil penalties it has ever recovered under the state's consumer protection law.
Kazanjian, in an order dated Dec. 31, said the penalties were warranted on the grounds that HealthMarkets, which UnitedHealth acquired in 2019, and two of its subsidiaries marketed major medical and supplemental insurance in bundles from 2012 to 2016 in a way that deceived consumers into buying supplemental policies.
The decision followed a non-jury trial to assess damages after the defendants had already been found liable for violating the Massachusetts Consumer Protection Act and an earlier consent judgment with the state.
Kazanjian said sales agents were trained to hide the costs of individual policies so consumers did not know what they were buying. She called the practice "egregious," saying it "targeted vulnerable consumers who could least afford their products.
"For years, the defendants preyed on financially vulnerable individuals, deceiving them into buying products they didn't need or couldn't afford," Campbell said in a statement. "This order holds the companies accountable and will provide meaningful restitution to consumers across the Commonwealth."
Yet the nearly $50.1 million in restitution and $115.1 million in civil penalties awarded by Kazanjian fell short of the $368 million in total restitution and penalties Campbell's office had asked the judge to award.
She declined to award a larger sum after concluding that the state had failed to establish the extent to which any Massachusetts consumers were harmed by misstatements the defendants made in TV and radio advertisements.
UnitedHealthcare, UnitedHealth's health insurance subsidiary, in a statement said it would appeal the decision, which is "clearly unsupported by the evidence and contrary to established Massachusetts law."
In 2020, Campbell's predecessor, now-Governor Maura Healey, filed a complaint accusing Texas-based HealthMarkets of engaging in a deceptive sales scheme that had cheated more than 15,000 residents out of more than $43.5 million since 2011.
The complaint alleged that HealthMarkets' actions violated an earlier settlement the state reached with it in 2009 resolving a lawsuit the state filed accusing it of similar deceptive practices.
In 2022, a different state court judge found HealthMarkets and its two subsidiaries liable for violating that settlement and the state's consumer protection law. The case then proceeded to trial on damages only in late 2023.
The case is Commonwealth of Massachusetts v. The Mega Life and Health Insurance Company, et al, Suffolk County Superior Court, Massachusetts, No. 0684CV04411
For Massachusetts: Emiliano Mazlen, James Sweeney, Ethan Marks and Michael Wong of the Office of the Massachusetts Attorney General
For HealthMarkets: Colin Zick of Foley Hoag and Michael Fee of Verrill Dana
(Reporting by Nate Raymond in Boston)
