After a long investigation, LA City Attorney Carmen Trutanich filed charges Wednesday against three affiliated health insurance companies controlled by investment bankers Goldman Sachs and the Blackstone accusing them of fraud.
The criminal branch filing accuses the firms of engaging “in a
long running scheme to defraud consumers involving the sale of ‘junk insurance’ …marketed as comprehensive that includes
hidden and obscure exclusions and limitations that leave policyholders without coverage.“
Under Unfair Competition and False Advertising Laws, fines could reach tens of millions of dollars.
The firms are Mega Life and Health Insurance Company, both of Califonria, and Mid-West National
Life Insurance Company of Tennessee. Their parent company, HealthMarkets, Inc.; their controlling shareholders,
Blackstone Group, L.P. and Goldman Sachs Group, Inc.; and three affiliated
HealthMarkets allegedly sold insurance worth $1.1 billion last year and has paid
special dividends to Blackstone and Goldman totaling $90 million.this year. They acquired HealthMarksts four years in an $850 million deal.
Agents are accused of using deceptive marketing techniques to “incentivize them to say
and do whatever it takes to sell a policy, including making misrepresentations
and concealing important information about the most basic terms of the coverage
The complaint says Blackstone and Goldman
Sachs knew or should have known that HealthMarkets was engaged in fraud and allowed it to continue.
The City Attorney’s Office has been conducting broad investigations of insurance fraud, which was at least part of the reason Trutanich had sought authority to impanel a grand jury and issue subpoenas — powers the City Council successfully fought against.