The Oregon Department of Consumer and Business Services (“Oregon Department”) recently announced it had entered into an Order to Cease and Desist, Final Order Assessing Civil Penalty and Consent to Entry of Order (“Order”) with an insurer in which the insurer will pay a $60,000 civil penalty for alleged violations of the Oregon Insurance Code.
The regulatory action against the insurer was the result of the Oregon Department’s investigation that found that beginning in June 2017, the insurer made a procedural change whereby it increased the premium rates of its customers’ Medicare supplement insurance policies on each policyholder’s next premium due date, rather than on the policy’s annual anniversary. Prior to implementing this procedural change, the insurer relied on its third party administrator to research and identify any states in which the procedural change would violate state insurance law. However, the list of such states that was provided by the third party administrator to the insurer mistakenly excluded Oregon.
As a result of the procedural change, the insurer increased the premium rates of 804 Medicare supplement policies in Oregon more than once in a 12-month period, in violation of Oregon Administrative Rules 836-052-0151(3)(b).
This regulatory action by the Oregon Department is a reminder that insurers cannot outsource their regulatory and compliance responsibilities and may be held strictly liable for alleged violations of insurance laws committed by their TPA business partners.
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