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IN RE:

 

 

ESIS, INC.

 

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CONSENT AGREEMENT
Docket No. INS-12-227

This Consent Agreement is entered into by and among ESIS, Inc. (the “Company”), the Maine Superintendent of Insurance (the “Superinten­dent”), and the Office of the Maine Attorney Gen­eral (the “Attorney General”).  Its purpose is to bring to a halt, without resort to an adjudicatory proceeding, violations of 39-A M.R.S.A. § 359(2) certified to the Superintendent by the Maine Workers’ Compensation Board (the “Board”) pursuant to that provision.

I
STIPULATIONS

  1. The Superintendent is the official charged with administering and enforcing Maine’s insurance laws and regulations.
  2. The Company is organized and domiciled under the laws of the State of Pennsylvania, and is licensed in Maine as a Third Party Administrator under License No. TAF34553, first issued February 26, 1992.  The Company handles claims arising under the Maine Workers’ Compensation Act of 1992, M.R.S.A. Title 39-A, as amended, and regulations of the Board issued there­under (the “WCA”).
  3. In 2005, the Board’s Monitoring Audit & Enforcement Division (the “MAE Divi­sion”) audited the records of the Company with respect to claims filed under the WCA with dates of injury in 2001.  This audit focused on compli­ance with WCA requirements for form filing, timeli­ness of indemnity payments, and accuracy of indemnity bene­fits.  The audit was later expanded to include a limited scope audit of 2003 and 2004 indemnity claims that were reported to the Board prior to March 12, 2004.  This expanded audit focused on apparent use of fictitious data in Box 24 and Box 28 of the memorandum of payment, late payments (initial pay) and violations subject to penalty under 39-A M.R.S.A. § 205(3).
  4. On February 14, 2005, the Board issued a Compliance Audit Report detail­ing its findings (the “Report”).  The Report’s findings relevant to questionable claims-handling techniques that violated 39-A M.R.S.A. § 359(2) included failure to timely pay benefits awarded by mediation agreements or Board decrees. 
  5. In December 2007, the Board and the Company entered into 23 consent decrees, in lieu of administrative hearings, addressing the findings in the Report.  In one such decree (the “Consent Decree”), the Company agreed that it had “engaged in a pattern of questionable claims-han­dling tech­niques in violation of Section 359(2)” of the WCA by failing to timely pay benefits awarded by Mediation agreements or Board decrees between September 14, 2000 and December 26, 2004.
  6. On December 21, 2007, the Board certified these findings to the Superintendent as required by 39-A M.R.S.A. § 359(2).
  7. In response to the Board’s certification, the Superintendent ordered, pursuant to 24-A M.R.S.A. § 221, a Targeted Market Conduct Examination of the Company examining claims with dates of injury between January 1, 2006 and December 31, 2008, for employees residing in the State of Maine or claimants involved in losses in the State of Maine, in which benefits were awarded by mediation agreements, board decrees, consent decrees, or lump sum settlements (the “Examination”).
  8. The resulting Report of Market Regulation Examination (the “Examination Report”) found that “[t]he pattern of questionable claims handling techniques relating to failure to pay or pay timely benefits awarded by mediation agreements, board decrees, consent decrees, or lump sum settlements has not come to halt.”  Specifically, the Examination Report identified one or more violations of 39-A M.R.S. § 324(1) in the payment of benefits for 18 of the 29 claims reviewed.
  9. A copy of the final Examination Report, which was accepted by the Superintendent on the effective date of this Agreement, is attached to this Agreement as Exhibit A.

II
MAINE LAW

  1. 39-A M.R.S.A. § 359(2) provides in part that:

[T]he [workers’ compensation] board … upon finding, after hearing, that an employer, insurer or 3rd-party administrator for an employer has engaged in a pattern of question­able claims-handling techniques or repeated unreasonably contested claims … shall cer­tify its findings to the Superintendent of Insurance, who shall take appropriate action so as to bring any such practices to a halt.
III
CONCLUSIONS OF LAW

  1. The Company violated 39-A M.R.S.A. § 359(2) by engaging in a pattern of question­able claims-handling techniques though December 31, 2008.
  2. The Superintendent is required, pursuant to the Board’s December 21, 2007 certification of its findings that the Company engaged in a pattern of ques­tion­able claims-handling techniques to take appropriate action to bring those practices to a halt.

IV
COVENANTS

  1. The Company shall comply with each provision of this Agreement.
  2. The Company shall bring to a halt the pattern of questionable claims-han­dl­ing tech­niques as set forth in this Agreement.
  3. The Company represents that it has conducted its own review of the 29 claims reviewed by the Examiner, and complied with the terms of all mediation agreements,  WCB decrees, consent decrees and lump sum settlements and paid any interest or penalties due under the WCA because of its prior failure to comply with such orders, whether or not noncompliance was identified to the Company by the Examiner, and further represents that, to the best of its knowledge after reasonable inquiry, these claims constitute the entire universe of claims with dates of injury between January 1, 2006 and December 31, 2008 and involving an award of benefits by mediation agreement, board decree, consent decree, or lump sum settlement. 
  4. Within thirty (30) days after executing this Agreement, the Company shall adopt, and deliver to the Superintendent for approval, with a copy to the WCB Deputy Director, MAE Division, written procedures that ensure that the Company complies fully with the terms of each mediation agreement, board decree, consent decree, or lump sum settlement to which it is a party and with the WCA’s provisions concerning such orders.

At a minimum, such procedures must include plans for:

  1. ensuring a compliance rate of 90% for such orders;
  2. implementing adequate review procedures for such orders; and
  3. auditing, on at least a quarterly basis, all claims in which benefits are paid under a mediation agreement, board decree, consent decree, or lump sum settlement, to measure compliance with subparagraph (a). 

The Company shall deliver to the Superintendent and the WCB Deputy Director, MAE Divi­sion, the results of the audits referred to in sub­paragraph (c) for four (4) suc­ces­sive calendar quarters starting with the quarter in which the Company executes this Agree­ment.  The Company shall deliver each audit report within thirty (30) days after the end of the applicable calendar quarter.  Each report shall be an Excel spreadsheet and contain the following data, safeguarded in accordance with the WCA, for each claim:  the Board number, if known; the claimant’s Social Security number (general format, no dashes); the claimant’s last and first name (in that order); the date of injury; the Company claim number; and the TPA, if any. Within forty-five (45) days thereafter, the Superinten­dent may call a meeting with the Company to discuss any concerns he may have with the Company’s claims performance during the period covered by such audit report.  Fail­ure to call any such meeting shall not waive any of the Super­in­tendent’s or the Attorney General’s rights under this Agreement.  The Company shall deliver with the last audit report (the “Final Self-Audit Report”) a certification in the form attached as Exhibit B, attesting to the accuracy of all claims performance audit infor­mation required under this Agreement.  The Company shall also deliver, upon the Superintendent’s or the WCB Deputy Director’s request, any and all work papers and documents, in any format, in its possession, custody or control, related to any Self-Audit Report.

  1. The Company shall, for the period starting January 1, 2009 and ending as of the effective date of this Agreement:
    1. review all mediation agreements, board decrees, consent decrees and lump sum settlements for the Company’s compliance with the terms of such orders and with the WCA’s provisions concerning such orders;
    2. recalculate the benefits, and penal­ties and interest due thereon, to ensure their compliance with the WCA;
    3. pay to the appropriate claimants any benefits due, with the penalties and interest provided for in the WCA, and file with the Board such related forms as the WCA requires; and
    4. deliver to the Superintendent and the WCB Deputy Director, MAE Division, by the date the Company must deliver the Final Self-Audit Report, an electronic spreadsheet report viewable in Microsoft Excel listing each claim so reviewed (the “Look-Back Report”).  The Look-Back Report shall contain the follow­ing data, safeguarded in accordance with the WCA, for each claim: 
      1. the Board number, if known;
      2. the claim­ant’s Social Security number (gen­eral for­mat/no dashes);
      3. the claimant’s last and first name (in that order);
      4. the date of injury;
      5. Com­pany name and claim file num­ber; the incapac­ity periods;
      6. the type and amount of benefit originally paid;
      7. whether or not the claim was settled under 39-A M.R.S.A. § 352 (Y or N) and the date of such settlement;
      8. the type and amount of benefit paid after review;
      9. the amount of penal­ties paid after review;
      10. the amount of inter­est paid after review;
      11. the amount of overpayment upon review; and
      12. the name of the person con­ducting the review.

The Company shall deliver with the Look-Back Report a certification attesting to the accuracy of all information in the report, in the form attached as Exhibit B.

  
This paragraph shall not apply to any claims that are subject to the audits described in paragraph 16, or to any claims that were previously presented to the Company or third-party administrator work­ing on behalf of the Company that were previously audited by the Board and subse­quently corrected by the Company or third-party administrator.

  1. Should the Superintendent, in his sole and absolute discretion, determine, within twelve (12) months after receiving the (i) Final Self-Audit Report or (ii) Look-Back Report, that the Company:
    1. did not meet or exceed on average the payment bench­mark in paragraph 16(a) of this Agreement during the self-audit review period described in paragraph 16, then the Company shall deliver a civil penalty to be determined at the sole and absolute discretion of the Superintendent but not exceeding $15,000 to the Superintendent, within thirty (30) days of receiv­ing the determination; and/or
    2. failed to correct deficiencies in benefit payments as required by paragraph 17(c) (including payment of interest and penalties provided for in the WCA), resulting in compliance with the WCA in less than 93 percent of claims required to be reviewed pursuant to that paragraph, then the Company shall deliver a civil penalty to be determined at the sole and absolute discretion of the Superintendent but not exceeding $5,000 to the Superintendent, within thirty (30) days of receiv­ing the determination.

The Company agrees that (i) any civil penalties assessed in accordance with subsection (a) and/or (b) above will have resulted from its failure to meet the standards prescribed in this Consent Agreement, (ii) in declaring a civil penalty due, the Superintendent may rely on the Self-Audit Reports and the Look-Back Report as conclusive evidence of the fact and extent of such failure, and (iii) the amount of this penalty will not limit fur­ther measures, penalties or remedies that the Superinten­dent or the Attorney General may impose or seek under paragraph 26 below.

  1. The Company shall pay, to the extent assessed by the Superintendent, the Superintendent’s reason­able costs and expenses of monitoring its compliance with, and enforcing the Company’s obligations under, this Agreement.  Nothing in this paragraph prevents the Company from requesting, subject to the waivers in paragraph 21 below, that the Superintendent reconsider the amount of any such assessed costs. 
  2. The Company shall not recoup any payments of refunds, interest, or civil penalties made under this Agreement or any costs associated with complying with this Agreement in any future rate adjustments.

V
MISCELLANEOUS

  1. The Company waives any:
    1. hearing rights arising from this Agreement,
    2. objection to any action that may be taken by the Superintendent pursuant to this Agreement, including but not limited to the imposition of the penalties specified in paragraph 18 and agrees it will make no appeal from this Agreement; and
    3. objection to the Board’s release to the Superintendent and the Attorney General of “audit working papers”, as defined in section 153 of the WCA, related to any audit of the Company and, in connection with this waiver, to the use of such papers by the Superintendent and Attorney General for purposes related to the implementation and enforcement of this Agreement.
  2. The Company acknowledges that this Agreement is a public record within the meaning of 1 M.R.S.A. § 402 and will be available for public inspection and copying as provided for by 1 M.R.S.A. § 408, and will be reported to the Regulatory Information Retrieval System database at the National Association of Insurance Commissioners.
  3. The Company has been advised of its right to consult with counsel and has, in fact, consulted with counsel before executing this Agreement.
  4. This Agreement does not bind any person or entity not a party to this Agreement, or limit the Superintendent’s ability to seek any available legal remedy for alleged or actual viola­tions of the WCA or the Maine Insurance Code against any Company affiliate or subsidi­ary not a party to this Agreement or against any entity from which the Company obtains WCA claims administrator services.
  5. Nothing in this Agreement shall limit the ability of the Superintendent, in his sole and absolute discretion, in order to determine whether the Company has brought to a halt all violations of 39-A M.R.S.A. § 359(2) established by the Consent Decree, to investigate the:
    1. handling of the Company’s medical and indemnity claims having dates of injury after December 31, 2008;
    2. accuracy of the self-audit quarterly review described in paragraph 16; or
    3. accuracy of the medical and indemnity claims review described in paragraph 17.
  6. The purpose of the self-audit quarterly review described in paragraph 16 and the medical and indem­nity claim review described in paragraph 17 is to bring to a halt the violations established by the Consent Decree and the Report of Market Regulation Examination.  Therefore, in consideration of the Company’s execution of this Agreement, the Superintendent and the Attorney General shall not pursue civil penalties, disciplinary measures or other civil or administrative sanctions, other than those agreed to herein, for violations established by the Consent Decree or the Report of Market Regulation Examination that continue through the period of the paragraph 16 and paragraph 17 reviews.  However, the Superintendent or the Attorney General may pursue any available legal remedy, including without limitation imposition of additional civil penalties and the limitation, suspension or revocation of workers’ compensation authorities issued to the Company by the Superintendent should the Company:

    a.         engage in conduct that violates 39-A M.R.S.A. § 359(2) after the period of the paragraph 16 and paragraph 17 reviews; or
    b.         violate any provision of this Agreement other than as described in subsections (a) and (b) of paragraph 18; or
    c.         otherwise violate Maine law.

  7. The effective date of this Agreement is the date entered in the Superintendent’s signature line below.
  8. This Agreement may be modified only by the written consent of all parties.

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Dated:                        , 2012

ESIS, Inc.

 

By:______________________________________
Its:______________________________________

 

Printed Name and Title

Subscribed and sworn to before me this _______ day of ________, 2011.

____________________________

Notary Public
____________________________
Printed name
____________________________
Date commission expires

 

Dated:                        , 2012

OFFICE OF THE MAINE ATTORNEY GENERAL

 

________________________________________
Jonathan R. Bolton
Assistant Attorney General

 

Effective
Date:                        , 2012

MAINE BUREAU OF INSURANCE

 

________________________________________
Eric A. Cioppa
Superintendent


Exhibit A

Report of Market Conduct Examination


Exhibit B

Form of Certification

IN RE:
ESIS, INC.

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AFFIDAVIT OF CORPORATE OFFICER

Docket No. INS-12-227

The undersigned, being duly sworn, says:

  1. Terms used but not defined in this affidavit shall have the meanings given them in the Consent Agreement entered into between ESIS, Inc. (the “Company”), the Superintendent and the Attorney General under Bureau docket number INS-12-227. 
  2. I have read and understand the Consent Agreement and exhibits attached thereto.
  3. I understand that the Board and Bureau may rely on the truthfulness of the information contained in and materials attached to this affidavit and that the truthfulness of this information is material to the ability of the Superintendent and the Board to evaluate the Company’s compliance with the Consent Agreement.
  4. I have read the materials attached to this affidavit.  They accurately and completely summarize the information contained therein, as required by [paragraph 16/paragraph 17] of the Consent Agreement. 
  5. I hold the position identified below and have obtained all necessary authority from the Company to give this affidavit on its behalf in connection with the proceedings undertaken as Bureau Docket No. INS-12-227.

______________________________________
(name typed or printed)

 

______________________________________
(position typed or printed)

 

 ______________________________________
(company name typed or printed)

Acknowledgement
State of _______________
County of _____________

            Personally appeared before me on _____________, 2011, the above named ___________ __________________ and, being duly sworn, affirmed that thisaffidavit is based upon his or her personal knowledge and is true and correct.

                        Before me,
________________________________
Notary Public/Attorney-at-Law
[seal]                                      Printed Name: _____________________

My Commission Expires: __________________

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Last Updated: September 13, 2012