Washington Commissioner Fines PacificSource, Delta Dental, Lemonade, Others

Washington Insurance Commissioner Mike Kreidler issued fines totaling $576,500 against insurance companies, agents, brokers and unlicensed entities in October and November of 2024 for violations of state insurance laws and regulations.

The fines included $100,000 levied against PacificSource Health Plans for incorrectly processing claims; $130,000 in fines against Delta Dental and its health care benefits manager, Wyssta; and a $100,000 fine against Lemonade Insurance Co.

PacificSource fined $100,000

Kreidler’s office fined PacificSource Health Plans $100,000 for incorrectly processing claims, resulting in more than $85,000 in unnecessary co-payments.

A consumer filed a complaint with the OIC after their claims under a PacificSource plan required co-payments. Before purchasing the policy, the consumer confirmed with their insurance broker that mental health and dietician treatments would be covered without a co-pay or deductible if the providers were in-network and appointments were held virtually.

PacificSource, however, processed mental health treatments with a $40 co-pay and dietician treatments with an $80 co-pay even after the consumer had met their deductible. The consumer filed appeals, all of which upheld the company’s initial denial.

PacificSource’s medical benefits summary for the plan in question listed no co-pays for the in-network telehealth treatments, but in further inquiries from the OIC the company claimed “telehealth” included just audio-only visits, rather than audio and video visits, but the company did not specify this requirement in the summary of benefits for its plan or the training materials provided to its brokers. Its policy defined telehealth as including audio-only and audio and video visits.

PacificSource re-processed the 24 claims from the initial consumer and removed the member cost share. Upon the OIC’s request, the company identified 733 other people in similar situations who were charged a total of $85,885.23 (plus interest) in cost-shares. PacificSource re-processed those claims to remove the co-payment.

Lemonade fined $100,000

Kreidler’s office fined Lemonade $100,000 for using an incorrect base loss cost on property policies.

The rate was initially noticed by the Washington Insurance Examining Bureau, which notified Lemonade. Lemonade then self-reported the issue — which impacted policies between January and April of 2022.

Of the impacted policyholders, 43,094 were refunded a total of $415,589, which included refunds and interest. Refunds ranged from 1 cent to $319, with an average of $9.64.

Delta Dental of Washington and Wyssta fined a combined $130,000

Kreidler’s office fined Delta Dental of Washington and Wyssta, its health care benefit manager (HCBM), a combined $130,000 for violations of state insurance laws. This included denying claims based on terms that hadn’t been filed and approved with the OIC, as required by the insurance code.

Wyssta took over managing Delta Dental’s enrollment, invoicing, payment, and claims administration on January 1, 2022. This transition sparked an increase in complaints about notices and claims from the company filed with the OIC.

The OIC conducted a review of Delta Dental in 2023, which revealed violations related to notice and disclosure requirements, policy misrepresentations, and claim denials.

Delta Dental is required by law to post its contracted HCBMs, and the services each one provides, on its website. Despite being aware of these requirements, which went into effect on January 1, 2022, the company’s first public notice was delayed by five months and the search functionality for its website notice was delayed by 535 days.

The company’s evidence of coverage documentation from 2022 didn’t include the required HCBM language.

An OIC review of consumer complaints showed Delta Dental and Wyssta inappropriately denied claims based on time and frequency limits that weren’t filed with and approved by the OIC.

A review of Delta Dental’s processed claims from Jan. 1, 2022, to Jan. 31, 2023, showed 23 claims had limits applied that weren’t documented in the plan contract; 17 people were affected by these unapproved limits. Seven separate service types had denials and processing limits that weren’t disclosed to consumers in their plan documents, which included 50 separate billing codes for which unpublished limits were applied.

Wyssta finished updating its claims processing systems in April of 2023 to correct the issues.