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Insurance company to pay Massachusetts $760K for selling illegal products

United States Life Insurance, a subsidiary of AIG, has agreed to pay $760,000 in restitution and fines in a settlement with Massachusetts for selling and marketing illegal health insurance products to consumers.

"When Massachusetts consumers buy health insurance, they should be able to feel confident that the coverage complies fully with Massachusetts law," said the state's attorney general, Martha Coakley. "Our office will continue to monitor the marketing and payment practices of health insurers issuing coverage for Massachusetts residents to make sure that consumers are not misled and are not denied benefits to which they are legally entitled."

According to the AG's complaint, U.S. Life sold health insurance policies in Massachusetts that were not authorized for sale and did not cover health services required by Massachusetts law. The mandated services at issue included mental health, maternity healthcare, infertility care, pap test screening, mammography and preventive care for children up to age six. Through these actions, U.S. Life violated the state's Consumer Protection Act.

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[See also: Massachusetts AG report criticizes healthcare cost disparities; Massachusetts AG OKs Caritas Christi deal with provisions]

U.S. Life's parent company, AIG, did not admit to any wrongdoing as a part of the consent judgment issued in Suffolk County Superior Court. "We remain committed to providing leading products and services to our customers and have agreed to remediate the issues raised by the attorney general for affected policyholders,'' said Mark Herr, AIG's spokesman, in a prepared statement.

Under the terms of the judgment, U.S. Life will set aside $500,000 as a minimum amount for consumer relief to pay Massachusetts residents who were sold the plans. The company will also send letters to consumers entitled to relief and will refund premiums paid by Massachusetts residents who purchased unauthorized health insurance coverage, less any claims paid under it, to pay for mandated services previously denied to those who were covered under certain health insurance policies.

After affected consumers have been compensated, any remaining portion of the $500,000 will be paid to Massachusetts in addition to the $260,000 that U.S Life has agreed to pay separately.

As part of the consent judgment, U.S. Life did not admit any liability and cooperated fully in resolving the issue.