State OB/GYNs Receiving Restitution From Women’s Health USA

HARTFORD — Attorney General Richard Blumenthal this week announced that Women’s Health USA, Inc (WHUSA) will pay Physician’s for Women’s Health, LLC (PWH) $198,000 as restitution for improper rebates WHUSA accepted from insurers and a broker in exchanging for getting and keeping PWH’s business.

WHUSA is a health care management company that oversees the purchase of medical malpractice insurance for PWH and its physicians. PWH, the largest group of ob/gyn doctors in the country, includes more than 150 doctors in 25 practitioner groups throughout the state.

Mr Blumenthal’s investigation revealed that, on three separate occasions between 1998 and 2002, WHUSA accepted improper rebate payments, or “grants,” that insurers and broker Hilb Rogal & Hobbs, Inc (HRH) offered in order to secure PWH business. The cost of these special payments to WHUSA were folded into the premium rate charged to the doctors.

WHUSA used the rebates to pay for risk management services it provided to PWH.

The practice of insurers providing special payments in exchange for business is illegal in Connecticut. WHUSA cooperated in the investigation and, under the settlement, has agreed not to accept any rebates, directly or indirectly, in the future.

“This settlement delivers a strong message to the insurance industry that rebates discriminate against all insurance consumers,” Mr Blumenthal said. “They particularly harm the small-scale consumers who are not offered the same special favors from insurers and brokers that we saw in this case. Lower insurance rates should go to all consumers, not a select few. Insurers and brokers should be on notice that it is unacceptable to charge more to small consumers, while they give hidden rebates to the larger, lucrative clients. Hidden rebates are particularly damaging in the medical malpractice arena where the crippling cost of insurance has reportedly forced some smaller ob/gyn practitioners to give up their practice.”

Department of Consumer Protection Commissioner Edwin R. Rodriguez, who supported the settlement, said, “The cost associated with the rebates provided to the management company is filtered back into other ob/gyn physicians’ policies resulting in higher malpractice insurance premiums. This type of steering fuels the ever-increasing cost of health and malpractice insurance that so many doctors are rightfully upset about.”

In 1998, WHUSA oversaw the purchase of medical malpractice insurance for PWH from Medical Inter-Insurance Exchange (MIIX). While WHUSA was arranging the insurance purchase, it directed PWH’s insurance broker, Hilb Rogal & Hobbs, Inc (HRH), to solicit a “grant” from MIIX for WHUSA.

In exchange for PWH’s medical malpractice insurance being placed with MIIX, MIIX agreed to pay WHUSA an annual grant of $78,000 for two years.

Similarly, in 2000, WHUSA oversaw the purchase of medical malpractice insurance coverage for PWH from The Doctors Company (TDC). In exchange for PWH’s insurance being placed with TDC, HRH agreed to pay WHUSA $90,000.

In 2002, WHUSA agreed to recommend to PWH that HRH receive a $420,000 commission on the placements of PWH’s insurance. WHUSA’s recommendation, however, was conditioned on HRH separately agreeing to share $50,000 of its commission with WHUSA. Despite this agreement, WHUSA received only $30,000, which it used to pay for a risk management services for PWH.

Last year, Mr Blumenthal announced a $30 million settlement with HRH, the nation’s eighth largest insurance agency, for surreptitiously steering clients to certain insurers in exchange for hidden commissions.