HealthMarkets fined $20 million after multistate investigation

— -- A health insurer that sells mainly to the self-employed agreed Monday to pay $20 million — one of the largest fines of its type — to settle violations found by regulators in a 36-state investigation.

The investigation, prompted by numerous complaints, found that insurer HealthMarkets failed to properly train its sales agents, who didn't always fully disclose the limits of its health policies to consumers and sometimes did not pay for medical services promptly.

HealthMarkets, owned by three private-equity firms including the Blackstone Group, has about 612,000 policyholders in 44 states through its subsidiaries: Mega Life and Health Insurance, Mid-West National Life Insurance and Chesapeake Life Insurance.

The company sells an array of plans, many of which pay only limited amounts toward medical care. The settlement follows the January release of the investigators' findings, which covered company practices from 2000 to 2005.

"The severity of their actions certainly warranted that level of penalty. They hurt a lot of people," says Washington Insurance Commissioner Mike Kreidler, whose state and Alaska led the investigation.

HealthMarkets says it has made many changes since 2005, including calling all new policyholders to see if they understand their coverage and improving sales agent training.

HealthMarkets CEO Phillip Hildebrand said in a statement that the company worked closely with regulators during the investigation, adding it is "committed to serving the health insurance needs of individuals, families, the self-employed, and small businesses in a fully compliant manner."

If HealthMarkets does not resolve its problems, it could face up to $10 million in additional fines. Last year, it took in $1.6 billion and posted net income of $70.2 million, according to Securities and Exchange Commission documents.

The last big multistate investigation of a health insurer resulted in a $12 million fine last year against insurer UnitedHealth, which regulators said had a troubled bill-payment system.