UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 29, 2008
HEALTHMARKETS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction
of incorporation)
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001-14953
(Commission File Number)
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75-2044750
(I.R.S. Employer
Identification Number) |
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9151 Boulevard 26, North Richland Hills, Texas
(Address of principal executive offices)
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76180
(Zip Code) |
Registrant’s telephone number, including area code: (817) 255-5200
(former name and address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, in March 2005, HealthMarkets, Inc. (the “Company”) received
notification that the Market Analysis Working Group of the NAIC had chosen the states of Washington
and Alaska to lead a multi-state market conduct examination of the Company’s principal insurance
subsidiaries — The MEGA Life and Health Insurance Company, Mid-West National Life Insurance
Company of Tennessee and The Chesapeake Life Insurance Company (the
“Insurance Subsidiaries”) — for
the examination period January 1, 2000 through December 31, 2005. Thirty-six (36) states elected
to participate in the examination. The examiners issued a final examination report on December 20,
2007.
On May 29, 2008, the Insurance Subsidiaries entered into a regulatory settlement agreement
(“RSA”) with the Director of the Alaska Division of Insurance and the Insurance Commissioner of
Washington State (the “Lead Regulators”) that provides for
the settlement of the examination on the
following terms:
(1) A monetary penalty in the amount of $20 million, payable within ten business days of the
effective date of the RSA;
(2) A monetary penalty of up to an additional $10 million if the Insurance Subsidiaries are
found not to comply with the requirements of the RSA when re-examined. Compliance will be
monitored by the Lead Regulators, the Insurance Subsidiaries’ domestic regulators (The Insurance
Commissioner of the State of Oklahoma and the Commissioner of Insurance of the State of Texas) (the
“Domestic Regulators”) and the California Department of Insurance (collectively, the “Monitoring
Regulators”). The Monitoring Regulators will determine the amount, if any, of the penalty for
failure to comply with the requirements of the RSA through a follow-up examination scheduled to
occur during 2010;
(3) An “Outreach Program” to be administered by the Insurance Subsidiaries with certain
existing insureds, which will be implemented within six months of the effective date of the RSA.
The Insurance Subsidiaries will send a notice to all existing insureds whose medical coverage was
issued by the Insurance Subsidiaries prior to August 1, 2005 which will include contact information
for insureds to obtain information about their coverage and the address of a website responsive to
coverage questions; and
(4) Ongoing monitoring of the Insurance Subsidiaries’ compliance with the RSA by the
Monitoring Regulators, through periodic reports from the Insurance Subsidiaries. The Insurance
Subsidiaries will be required to continue their implementation of a corrective action plan, the
standards of which must be met by December 31, 2009. The Insurance Subsidiaries will bear the
reasonable costs of monitoring by the Monitoring Regulators and their designees. In the event that
the Monitoring Regulators find that the Insurance Subsidiaries have intentionally breached the
terms of the RSA, resulting penalties and fines as a result of such finding will not be limited to
the monetary penalties of the RSA.
The RSA will become effective thirty days after twenty-seven states agree to sign the
agreement. The Lead Regulators have executed the RSA.