Thousands in state ensnared by insurance fraud

By ANDI ATWATER, aatwater@news-press.com
Fort Myers News-Press
4-13-02

Deerfield Beach resident Richard Baer thought he was covered when he had double bypass surgery last August.

Today, nearly eight months later, Baer is more than $55,000 in debt and his insurer is nowhere to be found.

He is one of thousands of insurance fraud victims — including Lee County residents — lured last year into illegal insurance plans underwritten by companies not licensed or guaranteed to operate in Florida.

The result is millions of dollars in unpaid claims and more than 15,000 residents in unexpected debt.

“It's a horror story when it happens to you,” Baer said. “There's not a day goes by that I don't get a letter from somebody demanding payment. Before this, I had no debt. Now I might have to go bankrupt in the end.”

While the Florida Department of Insurance has been fighting this problem for years — they've shut down four illegal insurers in the past 14 months alone — complaints keep rolling in.

Now Insurance Commissioner Tom Gallagher is launching a public awareness campaign he hopes will educate people and encourage residents to do their homework before buying in to an insurance plan.

“You've got to watch out for yourself,” Gallagher said. “There's 16 million people here and we can't make sure everybody is licensed for you. We bust them good when we find them, but you need to find out who you're buying from.”

At least a half dozen complaints have filtered in from Lee County, insurance officials said, but the end result could number dozens of victims.

Most recently, insurance investigators busted TRG Marketing Group, an unlicensed company out of Indiana that stopped paying claims and folded in November. The company sold thousands of low-cost health plans to businesses and individuals typically under an association or union affiliation.

That's what happened to Baer, who owned a greeting-card shop and bought his insurance plan through his longtime broker under a small-business owners association.

“We were dealing with all legitimate people,” Baer said. “They were supposed to know better.”

Both employers and agents are enticed by the low premiums unlicensed insurers charge.

“It's buyer beware,” said Randy Kammer, vice president of regulatory affairs and public policy for Blue Cross & Blue Shield of Florida, a licensed carrier that, along with its subsidiaries, serves about 6 million Floridians.

“One would think that a licensed broker in the state of Florida would have enough sense to check and make certain they were only dealing with licensed entities,” Kammer said. “I can understand an individual not having that kind of sophistication, but not a broker. Again, when someone offers you these kinds of (low) prices, you should be alerted that this could be a problem.”

Under Florida law, if an unlicensed insurer fails to pay claims, agents who sold the unlicensed coverage may be held responsible.

Gallagher said his office is going after agents and brokers who deal in unregulated insurance plans.

In February, the department of insurance suspended the licenses of two agents suspected of selling insurance polices for TRG.

After TRG stopped doing business in Florida, those agents are accused of rolling over policyholders to other illegal, unlicensed plans.

Often, these illegal insurers offer premiums “too good to be true,” Gallagher said, and end up having inadequate funds to cover costs of future medical bills. The set-up is not unlike a pyramid scheme.

“When health insurance is rising anywhere from 15 to 30 percent a year, people are looking for something cheaper for their employees or face not providing insurance at all,” Gallagher said. “An agent comes in and says he has a great deal and they jump right on it.”

Some very large companies throughout Florida have fallen prey to these unlicensed insurance vendors.

Last year, two top executives of the Miami-based Well America Group were charged with transacting business without a license.

They sold unregulated major medical health plans to large employers throughout Florida, including the City of Leesburg, Central Florida Electric Cooperative, schools, car dealerships and restaurant chains.

When the company folded in August 2000, they left $3.7 million in unpaid claims, investigators said.

State insurance officials last year also shut down the Pennsylvania-based NAPT, which sold insurance under numerous association names, and the Nevada-based Employers Mutual, which also was marketing to trade and professional groups.

Insurance investigators urge consumers to check with the Department of Insurance to be sure they are dealing with a legitimate, Florida-licensed insurance company.

Licensed agents must pass a test and insurance companies must participate in a state guaranty fund that covers unpaid claims in the event of a bankruptcy.

“There's no such thing as good intentions when you're operating an unlicensed insurance company in a regulated industry,” Gallagher said. “It's about greed, an opportunity to collect money.”