The final indignity for David Self was the threat to turn him over to a collection agency.
After spending more than $14,000 in premiums in less than a year and receiving just $600 in benefits with much difficulty, Self told his agent that he wanted to cancel his medical insurance policy with Mega Life and Health Insurance.
"He said, 'Don't pay the premium, and they'll cancel it,'" Self said of his agent's advice. "So that's what I did."
It didn't take long for Mega to come knocking for payment, saying Self should have given 30 days' notice to cancel the policy.
"They wouldn't pay a bill, but they threatened to sue me and take me to the credit bureau because of one month's premium," said Self, a contractor in Dallas whose wife, Pamela Keller-Self, owns a small business.
Self and his wife are among more than 150 consumers, doctors and healthcare facilities that in the past two years complained to the Texas Department of Insurance about Mega and other subsidiaries of North Richland Hills-based HealthMarkets Inc. Those companies underwrite and sell health insurance and other insurance products for the self-employed and middle-income individuals.
And Texas isn't the only state where there have been complaints about HealthMarkets. In the past two years the company reached more than $37 million in settlements amid regulatory investigations in Massachusetts and more than 30 other states over complaints of fraudulent marketing, failure to pay claims and failure to cover ailments required by state laws.
As was the case with most of those who complained in Texas, however, the Selfs' letter to the state didn't help them much. Although the Insurance Department listed their complaint as "justified," the Selfs got no additional funds.
"It was a terrible disaster," David Self said. "Those people did everything in the world to keep from paying a claim."
HealthMarkets officials declined requests to talk to the Star-Telegram. A company Web site says officials have been working to improve service to customers.
The company, known as UICI until it was acquired by private equity investors in 2006, includes subsidiaries Mega, Mid-West National Life Insurance Co. of Tennessee (which is based in Texas), Chesapeake Life Insurance Co. and HealthMarkets Insurance Co.
Litany of complaints
The Selfs bought health insurance policies from Mega, paying extra for a StartWell supplement that they believed would cover up to $750 for a yearly physical, not including the $2,250 deductible per person.
Claims submitted by their doctor in Dallas, however, languished at Mega, David Self said. Calls to the company brought conflicting information, instructions to send claims to incorrect fax numbers and, in some cases, outright rudeness, Self said.
"One woman told me, 'Tough,'" he said.
Similar complaints were filed with the state Insurance Department, many revealing a high level of frustration among policyholders, doctors and medical facilities, state records indicate.
"This is not what we were sold by their smooth-talking agent!" says one written complaint by a woman who was not identified by the state. "This is a scam!"
The woman said she was paying Mega about $800 a month for insurance for her family of three and had added coverage for up to $1,000 in preventive care. She said the company then lumped ongoing treatment for her son's asthma into the preventive care category, which forced them to pay almost everything out of pocket.
When a lump was then discovered in her breast, the costs were applied to her deductible, according to the complaint.
"As time goes by and health issues have arisen, we are finding the amount of our bills paid by Mega is minimal," she wrote. "We are paying way too much out of pocket."
The woman initially filed her complaint in Illinois, but the case was transferred to Texas. By the time it arrived at the Texas Insurance Department, however, Mega had already reconsidered her case and made additional payments, records show.
In another complaint, a Texas woman said she tried to cancel her policy after getting onto Medicare. The Mega agent tried to persuade her to convert the policy to a Medicare supplement. Although she declined that offer, the premiums for her policy continued to be deducted from her checking account.
When she called for a refund, she was told she needed a form from Medicare to cancel her policy, but Medicare told her it didn't issue such forms, according to the complaint. She finally got a refund for nearly $800 only after filing a complaint with the state.
A claim from a Dallas endoscopy center was entered into Mega's computers at exactly half the amount billed, and payment was made accordingly, the company admitted. It agreed to reconsider the claim the same day the complaint was submitted to the state, and payment was eventually made on the remaining half of the bill, according to state records.
History of problems
An investigation was launched in 2005 against Mega and other HealthMarkets companies by Alaska and Washington state and eventually more than two dozen other states, including Texas.
The investigators cited a higher-than-expected number of complaints, particularly about sales policies, multiple lawsuits and allegations of misrepresentation of the company's affiliation with various associations through which it sold insurance.
In just the first six months of 2005, the investigation said, Mega and Mid-West alone prompted 931 complaints on more than 1,000 different allegations. Those include complaints of agent fraud and forgery, improper handling of claims, denial of benefits and failure to pay claims.
In 2008, the company agreed to pay a $20 million penalty to settle the case.
In 2009, HealthMarkets agreed to pay $17 million to settle allegations, including deceptive marketing, raised in Massachusetts, and the company agreed to pay $1 million in fines and $4.6 million in restitution in Maine to settle complaints that it overcharged customers.
Penalties in Texas, however, have been much smaller. Only 1 in 5 complaints against the company is considered justified by state regulators, and many of those result in no additional payments to consumers. Texas recently fined Mega $500,000, however, for failing to comply with state regulations for prompt payments of claims and fined Mid-West $100,000 for similar violations.
HealthMarkets brought in a new management team in 2008, led by Chief Executive Phillip J. Hildebrand, a former longtime executive with New York Life.
The company created a subsidiary this year, Insphere Insurance Solutions, and has begun selling all insurance products through independent agents. Insphere also sells products written by other companies, including John Hancock, Aetna and UnitedHealthcare.
In its annual report filed with the U.S. Securities and Exchange Commission, the company notes that adverse publicity can hurt its bottom line and says it is working to improve services.
"No company in the service business is without issues involving customer satisfaction and HealthMarkets is no exception," a company Web site, truth.healthmarkets.com, says. "We encourage our customers to contact us directly with their questions and concerns so we can resolve issues."
For David Self, that wasn't enough.
He dumped his Mega policy -- paying the disputed $1,500-plus final premium -- then bought a short-term policy until he recently became eligible for Medicare. His wife bought another policy for $650 a month, but the company is in bankruptcy, so she will look for another one. She will be eligible for Medicare in five years, he said.
"When you're in that bracket between 60 and 65, you get slaughtered," Self said. "It's a racket."
Dianna Hunt, 817-390-7084