John Hancock Life & Health Insurance Company will return a total of $23.8 million to customers and the state of New York and pay a $2.5 million fine for violations of the state’s law regarding the handling of long-term care insurance policies.

The New York State Department of Financial Services (NYDFS) announced Thursday that John Hancock will return nearly $21.6 million to consumers and/or their beneficiaries and $2.2 million to the New York State Medicaid Program following a compliance review with state requirements on long-term care insurance.

A joint investigation by the NYDFS and the state’s Department of Health concluded from 2001-19, John Hancock “prematurely terminated” 156 long-term care policies for New Yorkers before the customers had fully exhausted the benefits to which they were entitled, the NYDFS said. The early terminations resulted in 27,161 days of unpaid benefits, leaving customers to either pay the expenses out of pocket or go on Medicaid prematurely. John Hancock allegedly miscalculated lifetime maximum benefits on days when the customer failed to use the policy’s full benefits.

The NYDFS determined 21 living insured consumers and the families of 130 deceased policyholders were owed compensation, according to the consent order.

Compliance considerations: The investigation was launched following a 2019 consumer complaint that John Hancock prematurely terminated a long-term care insurance policy called the New York State Partnership for Long Term Care. After the complaint was resolved by John Hancock to the state’s and customer’s satisfaction, the NYDFS launched “a review of all similarly situated insureds to determine whether any other partnership policies had been prematurely terminated,” according to the order.

The NYDFS probe found John Hancock violated four state insurance laws. Partnership policy provisions “were misleading and confusing” and did not clearly state the policy’s options for use of long-term facilities or its benefits and limitations, the order said. John Hancock engaged in unfair settlement practices and did not administer the plan’s policies in accordance with the language of the policy form the state Superintendent of Financial Services had approved, the NYDFS continued. The firm did not settle claims promptly, fairly, and equitably.

In addition to reimbursing affected consumers and paying the fine, John Hancock launched a “thorough review” of its long-term care policies and certificates. The firm agreed to provide the NYDFS with monthly updates on the progress of all corrective actions taken, until the regulator is satisfied.

John Hancock response: In an emailed statement, a spokesperson said the company has been “working diligently with the New York State Department of Financial Services and the New York Department of Health to ensure customers with New York Long-Term Care Insurance Partnership policies impacted by this administrative error receive the benefits due to them.”