MADISON, Wisc. (CN) – Sanctions and fines from five states didn’t stop Cinergy Health from using “false and misleading infomercial advertisements” to push its “major medical coverage that in reality is extremely limited,” a class action claims in Federal Court.
Lead plaintiffs Harry and Rhonda Wiedenbeck sued Cinergy, American Medical and Life Insurance Co., and the National Congress of Employers. Cinergy is based in Tallahassee, Fla., the other defendants in Madison.
Cinergy markets itself through American Medical and Life, offering major medical coverage with no exclusions for pre-existing conditions, but “consumers do not get the benefits or coverage advertised, and for which they paid,” the Wiedenbecks say.
They claim the three defendants “intentionally played upon the vulnerabilities of people who either could not qualify for, or could not afford, traditional ‘major medical’ health insurance coverage by falsely presenting the American Medical policies as a low cost way to obtain such coverage.”
The Wiedenbecks say the companies habitually deny, delay and underpay claims – a pattern which is “the subject of numerous consumer complaints in Wisconsin and elsewhere,” it says.
They claim the pattern involves “a) making it difficult for policy holders to determine which entity or which person within which entity was responsible for responding to or answering questions about claims; b) routinely denying claims by misapplication of the pre-existing condition limitation; c) singling out and misusing billing and diagnosis code information to misclassify claims as either excluded or subject to significant payment limitations under the policy; d) delaying response to claims and policy holder calls for weeks and months.”
They say the companies bank on policyholders’ accepting rejection of their claims, and assume that even if policyholders are especially persistent they will not have the legal resources to fight the pattern of denial, delays and underpayments.
One or all three of the alleged conspirators were sanctioned in New York, Arkansas, Florida and Maine for their misleading infomercials – the same ads that run in Wisconsin – according to the complaint.
“Based on these same infomercials, in April 2011, the Maine Bureau of Insurance revoked Cinergy’s right to sell insurance in Maine, and fined it $600,000,” the complaint states. “The Bureau also ordered Cinergy that Cinergy provide a full accounting as to all premiums paid and compensation received. Maine’s Superintendent of Insurance based the revocation and fine significantly upon an infomercial titled ‘Real Health Insurance,’ with subsequent screen shots
Stating, ‘All Medical Conditions Accepted.’ Just like the infomercials run in Wisconsin. She further deemed the ads to be deceptive and misleading to Maine consumers: ‘For consumers, “real” health insurance means the type of health insurance consumers ordinarily think of when they hear the words “health insurance” – major medical insurance coverage.’ Additionally, she found that Cinergy’s misrepresentation of the terms of coverage was intentional.”
And that’s not all, the complaint states: “In yet another state, American Medical was sanctioned and fined $700,000 for fraudulent sales practices. In July 2009, The New York State Insurance Department, based in large part on the misrepresentations made in these same style infomercial ads as were shown in Wisconsin, ordered American Medical to cease selling these policies in New York. Examples of fraudulent ads included (a) advertising ‘no annual limits of deductibles for surgery,’ when in fact there were limitations on coverage such as $100 per visit for five doctor visits per year, and (b) advertising ‘most pre-existing conditions are accepted’ without disclosing that there would be zero coverage for pre-existing conditions for a period of six months.”
The Wiedenbecks claim the defendants operated the same way in Wisconsin.
Neither plaintiff had major medical insurance, but had major health issues, making them “precisely the kind of prospects” the defendants targeted, according to the complaint.
The Wiedenbeck say they were “pursued for the purpose of maximizing the amount of money received in premium and ‘dues’ payments and minimizing the amount of money paid out in claims, all with the objective of securing undeserved revenue from unsuspecting consumers.”
They say they called Cinergy after seeing its infomercial. Harry Wiedenbeck says he made it clear that he wanted “major medical” coverage for his family.
“The Cinergy representative did nothing to correct Mr. Wiedenbeck’s misperception concerning the nature of the American Medical policy, continuing to mislead him about the nature of the coverage consistent with the infomercial and Cinergy’s marketing scheme, and encouraged him to purchase the product, obtaining his credit card number and obtaining his authorization to automatically charge the credit card for the monthly premium,” according to the complaint.
The Wiedenbecks says they discovered the true nature of the plan they had bought when Rhonda Wiedenbeck’s hospital stay for stroke symptoms was not paid for, on the basis that it was for a “mental health” condition.
The Wiedenbecks say they couldn’t pay the out-of-pocket costs on time and calls they made to Cinergy and American Medical were left unanswered, so the bill was sent to collections.
They seek actual damages and punitive damages for fraud and bad faith.
They estimate the class damages exceed $5 million.
They are represented by Lynn R. Laufenberg, with Laufenberg, Stombaugh & Jassak, and Austin Tighe, with Feazell & Tighe, Of Austin, Texas.