As complaints and problems mounted at Benicorp Insurance Co. this spring, Indiana Insurance Commissioner Jim Atterholt did
two things to protect its customers.
He went to court to force the Indianapolis health insurer into receivership, and he asked other health insurers to pitch plans on how to take care of Benicorp's customers and employees.
His response points up Atterholt's philosophy toward consumer protection. He says he's tough on the "bad actors," but friendly toward the "good actors"--in part, so he can call for their help when needed.
And he says data the department collects show his approach has been effective--even more effective than his predecessors'.
Not everyone is convinced, however. That's because Atterholt has done so much in his 2-1/2 years as commissioner to promote industry causes, whether it's policy issues or promoting Indiana as a good place for insurers to operate.
"Skepticism is healthy. Remember, these people are trying to sell us stuff. A certain amount of skepticism is appropriate. It's essential," said Julia Vaughn, a health insurance specialist for the Citizens Action Coalition of Indiana, a consumer advocacy group.
But Atterholt, 45, a former Republican legislator and lobbyist for AT&T Indiana, argues he can be more effective on consumers' behalf if he has good relations with insurance companies.
"We've established a dialogue with them," Atterholt said of insurance companies, as he leaned back in a cushioned chair at a conference table on the third floor of the department's offices on West Washington Street. To resolve some complaints, he said, "I'll call up the president of the company and say, 'Can you help me?'"
In the Benicorp case, Atterholt persuaded UnitedHealthcare Insurance Co. to agree to take on Benicorp's customers, regardless of their medical conditions, and to offer 60 jobs to the roughly 100 workers likely to be displaced. He also persuaded a Marion Circuit judge to give him control of Benicorp's ailing business.
Benicorp, owned by a Chicago-area company called McKee Heritage Holding Corp., had fallen behind on paying its claims, sparking scores of complaints with the Insurance Department. It stopped writing new business in July and was forced into receivership in August.
Carol Cutter, Atterholt's deputy commissioner for company compliance services, sums up his approach this way: "You get more flies with honey than vinegar."
By some measures, Atterholt's approach has proved remarkably successful.
The amount of money recovered and repaid to consumers has easily doubled under Atterholt compared with his immediate predecessors, Sally McCarty and Amy Strati.
Indiana's Insurance Department played some role in returning $14 million to insurance customers in 2006, up from $5.1 million in 2004--the last full year before Atterholt arrived.
Atterholt said that measure is the most important to the department, because it includes money paid to customers after they complain to the department. Typically, customers complain when their insurers do not pay a claim or pay too little. The Insurance Department makes sure the insurers pay all they should.
But it's a tricky measure, too, because the biggest amounts of money come from multistate settlements with national insurers. Those are typically spawned by investigations led by other state insurance departments or with help from the National Association of Insurance Commissioners.
Just this month, United Healthcare agreed to pay $20 million to 36 states, including Indiana, over claims-handling concerns.
Those kinds of payments often refund large amounts to big corporations that bought insurance policies, noted Joe Belth, editor of The Insurance Forum, a Bloomington-based industry publication. So not all those millions go to everyday consumers.
On other measures, Atterholt's toughness against insurers is mixed. The Insurance Department levied $676,000 in fines against insurance companies in 2005, more than double the $250,000 levied by the department in 2003. But last year, company fines dropped to just $105,000.
Atterholt explained that fines are irregular events that come typically after a long disciplinary process. So more fines can fall in one year than another. In an e-mail, he wrote that 2005 was "just a very active year."
Fines against insurance agents have shot up under Atterholt, from $57,000 in 2004 to $207,000 last year.
Amy Strati, former chief counsel and acting commissioner at the Insurance Department, sees Atterholt's success as a continuation of work done in the late 1990s under Insurance Commissioner Sally McCarty. In 1998, McCarty created an enforcement division to investigate complaints and levy fines.
Before, the department simply passed most consumer complaints on to the insurance companies. That process was infamously chronicled in a searing Wall Street Journal article in 1998, which said Indiana had "one of the least-effective insurance departments in the nation."
"I see this as a continuum of where things started in the late '90s," said Strati, who stayed at the Insurance Department for two years under Atterholt before joining the Baker & Daniels law firm in March.
Indiana's Insurance Department still is poorly funded, compared with departments in other states. According to a study by the National Association of Insurance Commissioners, Indiana's annual Insurance Department budget of $10.1 million ranks No. 36.
However, Atterholt and insurance industry lobbyists persuaded the Indiana General Assembly this year to give it nearly $1 million more in annual funding. Part of that money was used to hire a senior consumer analyst.
"We've been able to get the resources necessary to get ourselves to a better place," Atterholt said.
In Strati's mind, Atterholt's handling of a wayward agent in South Bend late last year stands out as one of his best moments as commissioner.
Atterholt took the unusual step of holding an administrative hearing in South Bend about All Star Insurance and its owner, Daneile Frydrych. Dozens of customers testified against the owner of All Star Insurance, which allegedly collected premium checks but never opened new policies or paid them to the insurance companies.
Even though the insurers had gained no money from the scam, Atterholt persuaded them to pay the harmed customers, anyway. As of July, 12 companies had paid $58,000 to consumers.
Atterholt has made a habit of calling insurance company chiefs to resolve consumer issues. Just a few months ago, he called Dan Krajnovich, Indiana CEO of UnitedHealthcare, on just such a matter.
"They certainly have challenged UnitedHealthcare on certain situations where they want to make sure the consumer is protected," Krajnovich said.
At other times, however, the department has seemed too cozy with the Minnesota-based company, at least in Vaughn's view.
The Minnesota-based company co-sponsored a conference in August about health savings accounts, or HSAs, a type of health benefits plan that replaces more typical health insurance. Indianapolis-based Anthem Blue Cross Blue Shield, another promoter of HSAs, also sponsored the conference.
At the time, that sparked harsh criticism from Vaughn, who called it "inappropriate" promotion for an insurance commissioner. Atterholt later invited Vaughn to have a booth at the conference, which she did.
Since Atterholt took office in January 2005, he has placed more of an emphasis than his predecessors on attracting insurance companies to operate in Indiana. The Insurance Department partly pays for an employee at the Indiana Economic Development Corp. to lure insurance company expansions.
And in late 2005, the Insurance Department drew criticism after it revamped its Web site to prominently tout Indiana's "positive regulatory climate" and other insurer-friendly attributes.
Consumer protection information was toward the bottom of the home page. Since then, the department has reversed the layout of its home page, placing consumer protection information at the top.
"There are some things that I wouldn't have done," Sally McCarty, Indiana's insurance commissioner from 1997 to 2004, said of Atterholt's tenure. "Like promoting HSAs. And I was troubled by the Web site."
Like Atterholt, McCarty said the insurance commissioner has to maintain good relationships with insurance companies. However, she said, consumer protection always has to be the number one priority, even in how the insurance commissioner is perceived.
"Insurance companies have plenty of resources available to get their point across," she said. "So I think you always have to put the needs of the consumers first."