The worst-laid plans
How a little company in Indiana ruined the lives of thousands of Floridians.
by Art Levine
City Link Magazine
April 16, 2003
Richard Baer is on a crusade. Ever since he discovered well over a year ago that he'd bought an apparently bogus health insurance policy from a company known as TRG, the 61-year-old Deerfield Beach resident has been seeking justice for the state's 30,000 victims of illegal health plans, left stranded with at least $6 million in unpaid claims. He doesn't, however, want to talk anymore about the specifics of what happened to him, after telling his story last year to everyone from the Sun-Sentinel to USA Today to the CBS Evening News. Instead, he's trying to keep public attention on the big picture. But he's gotten little practical help from the state for the $50,000 in unpaid medical bills and spoiled credit rating he faced after he underwent a heart operation in August 2001. This week, the state at last showed it was listening to the concerns of Baer and other victims by filing criminal charges against the two main executives of TRG. Carmelo Zanfei and William Paul Crouse were charged with selling insurance without a license and racketeering. Warrants were issued for the out-of-state residents, and bond was set at $1 million each. Crouse was arrested Monday in Indiana. If convicted on all charges, each could face up to 60 years in prison in addition to fines and restitution. The state also announced proposed disciplinary actions against 25 insurance agents for selling the TRG product, including the possible revocation of their licenses.
“These are major victories in our ongoing fight against unlicensed insurance operators who are preying on Floridians,” says Tom Gallagher, the head of the newly created Florida Department of Financial Services (DFS).
But Baer points out that there's an underlying issue that still hasn't been addressed: “How did this little company in Indiana get thousands of customers they never intended to pay — and get away with it?” It's a question that goes to the heart of a failed regulatory system and a host of reputable businesses, including leading insurance agencies, that seemingly chose to ignore the dangers posed by TRG Marketing LLC. Even though TRG's masterminds may ultimately face punishment, it could come too late to help people like Baer.
The executives of the company promoted their allegedly bogus plans to Baer and between 20,000 and 40,000 other people in about 40 states, roughly 7,000 of them in Florida. According to some estimates, the company may have taken in between $8 million and $15 million a month. (The company's attorney in Florida, Jed Berman of Winter Park, is virtually alone in insisting that the health plans, generally sold through sometimes-dubious employer associations, were legitimate.) TRG's insurance business has been ordered shut down over the last two years in several states, including Indiana, Hawaii, Florida, Nevada and Kentucky. The company stopped paying claims in November 2001, yet is appealing the cease-and-desist orders in Florida and Nevada.
But Zanfei and Crouse have been free to operate other businesses anywhere in the country. No Florida agent who hyped and sold TRG's policies has yet been charged with any crime. Indeed, even after Florida regulators closed down at least 10 bogus health plans that sold unlicensed, unauthorized insurance with the help of hundreds of Florida insurance agents, nobody has been imprisoned. At most, David Weinstein, the CEO of a crooked Pennsylvania-based organization, NAPT, pled guilty to communications fraud last August and agreed to pay $600,000 in restitution to victims. Yet even he was sentenced to only three years' probation.
“These scams continue to occur because these people don't get jail time,” notes Mila Kofman, an assistant research professor at Georgetown University's Institute for Health Care Research and Policy. In Florida, tougher crackdowns may lie ahead, beyond this week's TRG actions: Last October, a law was passed that made selling unauthorized insurance a felony. But as of last week, only seven agents have had their licenses permanently revoked for selling TRG or other unlicensed plans, though 25 more could now face that penalty and hundreds more are being investigated, according to a DFS spokeswoman. Still, we haven't seen “perp walks” of handcuffed insurance peddlers to send a message to other potential white-collar criminals.
But there has been a boom in questionable plans, in part because a worsening economy has made it harder for small businesses and the self-employed to pay the rising premiums of legitimate insurers. A third of all businesses with fewer than 10 workers rely on group arrangements for coverage and are especially ripe to be swindled. All told, three of the biggest unlicensed insurance companies — TRG, Employers Mutual LLC and American Benefits Plans — collected well over $50 million in premiums from more than 65,000 people across the country, most of whom joined group purchasing arrangements to get coverage, according to the Coalition Against Insurance Fraud and other experts.
“People are hungry for a reasonable health plan. And agents saw a way of making a killing out of all these hungry people,” says West Palm Beach attorney Robert Saylor, who has filed a class-action lawsuit against TRG and its Florida allies. “This was like a Ponzi scheme,” says Saylor of these insurance plans.
The state responded only after complaints began coming in to the regulatory agency in 2001, but that wasn't soon enough to help Baer and thousands of others who had been conned — or to prevent the scams in the first place. “The state of Florida let me down. If they had safeguards in place, I wouldn't be in my position,” he says. “It's too late for me. But I don't want this to happen to others.” He then takes out the newspaper articles he helped generate and a spiral-bound notebook in which he's carefully written the phone numbers of more than two dozen reporters and officials. “I kept the pressure on at all times,” he says.
In doing so, he and other critics have underscored the interlocking role in the TRG mess of Florida insurance agencies, prominent health-care provider networks and one of the country's biggest administrative services companies, Presidion Solutions. Nevertheless, the executives and agents at the well-respected, 30-year-old Dardick Agency of Miami, perhaps TRG's biggest champions in Florida, until very recently didn't face any discipline by the state, let alone criminal charges. Last week, the state notified Dardick's principal agent, Anthony Merlino, that he faced possible revocation of his license and accused him of committing 42 violations of state law governing his license. But he still hasn't been charged with criminal wrongdoing. Dardick, which has extensive experience selling and administering insurance plans, sold an estimated 2,500 TRG policies and established the employer association that lured people to obtain TRG's health plan. Merlino, the company's top sales executive, declined to comment, but the firm's attorney, Geralyn Passaro, defends the agency: “Not only did TRG and others defraud its policyholders, but they also defrauded legitimate, reputable insurance agents like Dardick. Unfortunately, people are blaming these agents, when TRG and the other insurance companies are the real culprits.” Last year, Merlino also told the Sun-Sentinel that he believed TRG's claims that it was exempt from state insurance regulation.
But while raking in commissions and fees, neither Merlino nor countless other licensed agents throughout the country apparently bothered to check with the Department of Labor's benefits help line (866/444-3272) to see if TRG Marketing were legitimate. Nor did the state regulatory agency actively warn agents and consumers about TRG until late 2001, and many agents also didn't bother to find out that it was unlicensed. “All parties in the system didn't know what questions to ask or warning signs to look for,” says Jim Quiggle, a spokesman for the Coalition Against Insurance Fraud. “And too many agents don't want to ask questions that will upset a profitable revenue stream and lead them to find out that they're in bed with crooks.”
The operators of bogus plans generally claimed that their policies were exempt from state regulation on various grounds. Yet those claims were demonstrably false — and easily checked. For instance, TRG asserted it didn't need state licensing because it was supposedly governed only by the federal Employee Retirement Income Security Act (ERISA), but it never registered with the Department of Labor as required by that act. Indeed, agents are supposed to know that a true ERISA plan is self-funded; covers only an individual business, union or association; and can't even be sold by agents. The promoters of dubious plans also often sold them through multiple-employer associations while wrongly claiming that those plans and associations didn't need state licensing. “In general, any agent should make sure a company is properly licensed before they represent that company,” says Sam Binnun, the supervisor of the unauthorized entities division of DFS' Office of Insurance Regulation.
Saylor says that agencies such as Dardick and other perpetrators of the TRG debacle were either “very naive or very greedy.” His lawsuit, scheduled for a hearing in May on whether it has legal standing, names not only TRG and Dardick but Presidion Solutions and several smaller insurance agents, including the colorfully named Jerry D. Crook of Kissimmee. All the parties named by such lawsuits and state regulators are essentially responding with finger-pointing, blaming others for being negligent or hoodwinking them. Crook, for instance, had his license suspended by the state in February 2002 for rolling consumers from one unlicensed plan to another. He didn't return phone calls from City Link but had told the Associated Press earlier this month that murky guidelines from the state led him to believe TRG's claims of legitimacy. “It's hard for an agent to figure out which ones are legal when the state can't even figure out which ones are legal,” he said. “Little guys like me get stuck in the middle. I'm a victim.”
State officials counter that the agents' training materials make clear which insurance plans are illegal or exempt from state regulation. Still, the state didn't launch its public-awareness campaign, called Verify Before You Buy, until April 2002, promoting a toll-free consumer line (800/342-2762) long after thousands of Florida consumers had already been swindled. And even now, many Floridians haven't heard this important message or know enough to check out their plans.
Too good to be true
Left holding the bag over the past two years are victims who were often in the middle of receiving life-saving medical procedures. More than their savings and credit were at stake: Their lives were placed at risk, too, by these unlicensed insurance companies without state reserves to back them up financially if they failed.
For Judy Harris, the stress proved almost too much. She is a woman in her 60s who got her and her husband's flimsy TRG health plan through a West Palm Beach auto-repair shop, owned by her son and daughter-in-law, that got its coverage from an administration-services company called Sunshine. That company, in turn, was acquired by Presidion Solutions, now being sued by Judy and her husband, Jerome, as part of the class-action suit. The daughter-in-law, Stephanie Harris, says, “We put our trust in Sunshine. They should have investigated the insurance they were offering.”
Presidion's executive vice president, James Baiers, blames the agents. “We had licensed brokers assure us it was a legal ERISA plan,” he argues.
In any case, the Harrises' trust was misplaced: Judy Harris ended up with $75,000 in unpaid bills after being diagnosed with cancer at a Palm Beach hospital and receiving chemotherapy treatments. “How can the state of Florida let people operate like that?” she asks. “You're leaving sick people standing there without nothing. When you're sick, you don't want to sit there and worry whether you're allowed to go to the doctor.”
Harris' problems began when she was misdiagnosed as having congestive heart failure while hospitalized with poor breathing in January 2001. She had a history of heart problems, including an aneurysm. At that point, she was still on a legitimate plan, but by March 2001, the old plan wasn't available, so she and her husband switched, at Sunshine's recommendation, to TRG. Her breathing problems worsened, and she eventually required a portable oxygen supply to stay alive. All along, she said, she assumed the bills were being paid, and, in small amounts, some of them indeed were. But when she was hospitalized for 10 days in the fall of 2001, she learned that she had cancer in the lining of her lungs and in her bones. She also discovered, soon enough, that the hospital bills weren't being paid. The cost: $50,000.
Afterward, she had to pay for chemotherapy, as well as regular $3,000 cancer-drug treatments to strengthen her immune system. “The bills kept coming, and I kept noticing they weren't paying nothing on them,” she recalls. By November, different facilities started sending her the bills and demanding payment. About the same time, TRG simply stopped payments altogether, and by December, she, like most TRG customers, got a letter from the state's insurance commissioner telling her that the company was under investigation and wasn't licensed to offer insurance. “I'm looking at this and thinking, 'What in the world is going on? I have to go to chemotherapy,' ” she recalls. The $50,000 hospital bill remained unpaid.
With the bills mounting, she became agitated and nervous every time she went in for her treatments. “I'd sit there, and my blood pressure went over 200 until I knew I was going to get my treatment,” she says. With her heart condition, for which she took three different medications, her soaring blood pressure was literally a threat to her life. “I could get another heart attack,” she observes. By the end of 2001, she eventually switched to a short-term, bare-bones plan from another insurer. Her new temporary plan paid out a maximum of only $10,000, the equivalent of just a month's worth of her cancer treatments, and her fear over her debt continued. Her husband, a mechanic at the auto shop owned by his son, says, “I went with her and kept telling her she'd get her treatments, until she calmed down, even if we had to sell our truck or the car to make the payments.”
Of course, if TRG had truly offered a sound plan, she wouldn't have had to endure the switch to another insurer or face the constant anxiety. “The thing is not knowing and being embarrassed whether you can continue to have your treatments,” she says. Fortunately, most of her doctors — especially her oncologist — ultimately permitted her to continue receiving health care even as she owed them money. A letter from Saylor to medical providers saying the issue was being litigated also reduced the flood of debt-collecting calls and dunning notices. But it wasn't until December 2002 that she and her husband found, through her family's help, a full-fledged, legitimate health plan that would take them — at nearly $1,200 a month. TRG's too-good-to-be-true monthly premium had been $487 for the couple, low given her pre-existing conditions.
Looking back, Stephanie Harris, who took the lead in shopping for insurance, realizes she had suspicions even before her mother-in-law went into the hospital. She recalls taking Judy one day to three different facilities, including St. Mary's hospital, for tests and X-rays and being told by hospital staff that they'd never heard of TRG. “What kind of company is this that no one ever heard of?” she wondered, and called Sunshine with questions. The firm assured her that TRG was just a company new to the state. She took their word for it: “I don't have time to check out insurance companies; they're supposed to take care of that.” Her worries increased when, while her mother-in-law was hospitalized for cancer treatment, Judy Harris faced pressure to leave the hospital early because it looked as if TRG wouldn't pay. Her family fought back, backed by her oncologist, with Jerry Harris telling the doctors: “She's not leaving until you find out what's wrong with her.”
In some ways, Judy Harris was lucky: She survived. Her cancer is in remission, and she doesn't need a portable oxygen supply to breathe anymore.
Pete Orr, a champion Orlando-area stock car driver, wasn't so fortunate. Orr had a seminar business for young drivers when he learned about a promising plan offered through a group, AEBA, also known as the American Employees Benefit Association, run by Dardick. He signed up in March 2001 but got sick with lymphoma and leukemia by September 2001. He was making some progress, when Pete and his wife, Terri, received the shocking news from AEBA telling them that TRG had shut down as of Nov. 30. “If they were true agents,” his widow says of Dardick, “they should have known that this is not the type of insurance you can sell.” Ultimately, because of the unpaid bills from TRG and the lack of subsequent insurance available to them because of TRG's failure, they owed $250,000 in medical bills.
The most heartbreaking impact of the TRG collapse came last April, when Orr's cancer was in temporary remission and he was a candidate for bone marrow transplant at the M.D. Anderson Cancer Center in Houston. Yet Orr was already so deeply in debt he couldn't afford it. In fact, because TRG wasn't considered credible coverage, the family couldn't get any new health insurance between January and June 2002 that might have paid for his transplant. The Cancer Center demanded $8,000 upfront, and he had to find a way to pay hundreds of thousands of dollars for the transplant on his own. Even with his brother ready to donate a perfect match, Orr, a racing star who'd won 300 races, faced his bitterest defeat and couldn't go. “He was furious,” Terri Orr recalls. “That's something he really wanted to look into.”
By last June, they managed to find a good health plan through Aetna, one that covered profitable small businesses. But by then, Orr's health didn't permit him to have the transplant; they were also still burdened with past debts as the once-athletic Orr got weaker while he continued chemotherapy and radiation, losing his hair and mustache. Eventually, a tumor showed up on his heart, and he had to go back into the hospital, his fever rising. He died Nov. 18, 2002.
Terri Orr has learned some hard lessons from it all: “You have to check the insurance; you can't trust people.” The independent agent who sold her the policy — after Dardick had touted it — was notified last week that he could face the possible revocation of his license. Orr notes that the state is hoping to recover the funds owed her through the agent's “errors and omissions” liability coverage. Unfortunately, some insurance agents say, most of those policies don't cover the sale of bogus insurance, so Orr may never recover the $250,000 she'll have to pay.
Yet Pete Orr has left a legacy beyond the racetrack. In March, a bill passed a state Senate committee that would provide stronger penalties for operators of unlicensed insurance plans, including a minimum two-year sentence for the worst violators. The bill, introduced by Orr family friend and state Sen. Bill Posey, R-Rockledge, was dubbed “The Pete Orr Insurance Anti-Fraud Bill.” It also spelled out the right of consumers to sue the owners of unlicensed companies. “Pete Orr died an unfortunate and untimely death, and his death was even more tragic in that he died worrying about the unpaid bills he left behind,” Posey said at the time.
The legislation adds to a law that took effect last October. That new law primarily focuses on agents, making the selling of unlicensed insurance a third-degree felony punishable by as many as five years in prison. (The civil system usually offers little relief regarding an agent's obligations. Consumers already have the theoretical right to sue their agents for payment of unpaid medical bills, but most agents don't have the necessary liability coverage or deep pockets to reimburse their wronged clients.) Previously, as DFS spokeswoman Nina Banister points out, selling bogus insurance was only a misdemeanor, making it unlikely that such crimes would be pursued by prosecutors who focus on felonies. Still, for an agency that boasts that it leads the country in referring all types of insurance fraud to prosecutors, it's been relatively slow to seek criminal prosecution of the promoters of illegal plans. In the TRG prosecution, one agency official contends, the state didn't move more quickly because it wanted to build an airtight criminal case against the principals.
Terri Orr doesn't fault the state's response. “The state is doing something,” she says. “I don't blame the state agencies. I feel like it's Dardick's fault: They should know what an ERISA plan is.” As for her own insurance agent, “I don't know anything about health insurance, and I have to believe that he's sending me in the right direction.” Unfortunately, she adds, “He didn't know his business.”
The runaround
Whether it's greed or ignorance that motivated TRG's Florida boosters, the company's victims are still embittered at the false promises and bureaucratic runarounds they got while waiting for their bills to be paid. Ronald and Gerridine La Rovere, owners of a small uniform company who live in Lake Worth Shores, were eager for the low premiums and broad coverage TRG promised. They had long trusted their insurance agent, Barbara McBride, but the premiums with the plan they were on had skyrocketed to about $10,000 a year. So they believed her, they say, when she told them TRG was an excellent, highly recommended plan that cost half what they were paying for their current one. They signed up with the Dardick-run AEBA in May 2001 to get the TRG plan.
But Gerridine La Rovere didn't discover how hollow it was until months after she had sinus surgery in September 2001 at North Point Surgical Center. It took some doing to get TRG's approval for the surgery, but she didn't realize the company had never paid $45,000 in surgery-related bills until she got a stern letter from a lawyer demanding payment in March 2002. “I almost fainted when I found out no one got paid,” she says. She was especially surprised because the company had previously paid for her annual physical. The couple then learned that the unpaid bills had supposedly been sent directly to a third-party administrator. But for months, they got no response from that company and just heard a tape recording reassuring them that “every effort” would be made to pay the claims. She still believed the bills would be paid, even though she and her husband got a notice at the end of November 2001 from AEBA telling them that TRG had shut down.
She had been comforted by her agent that it was all a technical mixup that would ultimately be resolved with reimbursed medical bills. And she accepted, at least initially, AEBA's Pollyanna-like reassurances about their continued health coverage. “As an AEBA member, you are indeed fortunate that things have worked out to your advantage,” the association wrote its members in that November letter. “You continue to be protected!” It touted a new health benefit program to replace TRG, the Ultra-Med Platinum Plan, which would use the respected Beech Street doctor/hospital network.
The La Roveres were shocked a few weeks later when they got a letter from Deputy Insurance Commissioner Kevin McCarty warning them that both AEBA and Ultra-Med were illegally offering insurance in Florida. In short, these health offers were allegedly just as worthless as TRG. “They are not legitimate under Florida law,” McCarty wrote.
AEBA countered with a letter asserting that the Department of Insurance was mistaken. “They were wrong in stating our actions are illegal, as this is totally false,” AEBA claimed. Its explanations didn't satisfy either the state or ultimately its customers, because it's no longer in business.
All the while, the La Roveres sought answers from Dardick and their own agent, who kept reassuring them their TRG-insured bills would get paid. But as Ron La Rovere complained at the time, “They have the premiums, while we have the bills.”
William Broome, the lawyer for Barbara McBride, a defendant in the Saylor class-action lawsuit, says, “She was assured by the Dardick Agency that handled [TRG] that it was completely legal, and as soon as she found out it wasn't, she did everything she could to protect her clients. It's unfortunate that she was the victim of the shenanigans of a big agency that ought to know better.” Regardless of who was at fault, the La Roveres were also bombarded by dunning letters, phone calls and even lawsuit threats, a mortifying experience for a couple who had always prided themselves on their pristine credit.
For Gerridine La Rovere, a retired business executive, the ultimate humiliation came last fall when she was accosted about her bill by an office manager while sitting with other patients in her surgeon's waiting room. “Unless you pay cash upfront, you can't be treated,” the staffer told her. La Rovere paid what cash she had on her for the visit and promised to send a check for the rest before she was permitted to see the doctor that day. “I can't go back there now,” she says, still shamed by the memory, “and I liked the doctor.” She, like other victims, wonders why the state couldn't have done more to prevent the apparent fraud by TRG and other companies. “Why did it take so long to ferret it out?” she asks. “They were in effect on the run in other states while they were getting going here,” Ron La Rovere adds. “It takes the state a year or two to catch up until a lot of people get hurt. They should be more preventive.”
Too little, too late
State officials, however, feel they've done everything they could to stop the scams. Since the unlicensed insurance plans never registered with the state, spokeswoman Banister points out, state regulators couldn't act until they got complaints. “Do burglars call the police and tell them they're going to rob your house?” she asks. “When we get information, we follow up and investigate.”
Maybe so, but new patterns of insurance fraud were already starting to emerge in Florida and across the country by late 2000 and early 2001, nearly a year before the state issued a warning to consumers about TRG. Florida itself began investigating a local unlicensed health plan, Well America Group, after receiving complaints in 1999. Two of its executives were criminally charged in February 2001 and later convicted of selling insurance without a license. Florida also shut down the NAPT plan in March 2001 in part because it sold insurance while falsely claiming to be an ERISA plan — the same ploy used by TRG to exploit thousands throughout 2001. When the state made these announcements, it stated: “The problem of unauthorized insurance can be difficult to uncover unless consumers register complaints.”
But the state waited too long to promote in a highly visible way warnings to consumers about this form of insurance fraud, regardless of press releases posted on its Web site. “State regulators were unprepared for the ferocity and size of these insurance scams,” notes Quiggle of the Coalition Against Insurance Fraud.
To Richard Baer, the state has, with one exception, also failed victims by not seeking court orders barring collection agencies and medical providers from harassing those left with unpaid medical bills. The state does prepare letters for creditors telling them that an individual was victimized by an unauthorized health plan, but that doesn't have anywhere near the same impact as a court decision. Baer cites as a model a sweeping court order obtained by the Labor Department in its case against Employers Mutual LLC, barring collection actions until the case is finally resolved. In Baer's view, “Florida never took the pressure off me.”
Regulatory flaws are just part of the climate that makes the spread of illegal health plans possible. TRG, for instance, started small but grew by exploiting the ignorance, desperation and gullibility of insurance agents and consumers — and the lack of coordination and awareness among state insurance departments and federal regulators. These days, experts say, the bogus plans are being peddled in a more low-key way with less-extravagant discounts.
TRG illustrates how easy it was, amid a crazy quilt of relatively ineffective regulation, to spread health plans to a needy public, abetted by money-hungry insurance agents. As recounted in the hometown paper of CEO William Paul Crouse, The Daily Journal in Batesville, Ind., Crouse started out running a company from his home, registering TRG in April 2000. He then expanded to a few dozen employees in small, nondescript offices in a nearby town. He was careful to avoid scrutiny from Indiana regulators by not aggressively marketing insurance in the state.
The company eventually claimed that it was just offering its health plan to employees and associates in its business of selling long-distance services. But as Florida charged in its cease-and-desist order belatedly filed in January 2002, TRG had no legitimate business and was just a front to sell bogus health insurance. TRG's Florida attorney, Jed Berman, still holds to the claim that purchasers of the health plan were somehow the firm's employees — a bizarre assertion that would surely come as news to Baer, Harris and other victims. In addition, Berman says “this wasn't a Ponzi scheme” and blames incompetent third-party administrators for the unpaid bills.
Whatever the truth, under the innocent guise of offering a small health plan to its own employees, TRG managed to gain a foothold in the health insurance field. It did this by joining the largest independently owned Preferred Provider Organization (PPO) plan in the country, the Beech Street health-care network, with 50 years of service and 345,000 affiliated health-care providers. The ever-vigilant Baer managed to get David Adams, the CEO of a Beech Street-linked network, HealthSmart, on the phone and asked him: “How did TRG come to you? How did you let them in?”
Baer recalls Adams telling him, “They came to us as a small company in Indiana with 30 to 40 employees.” Baer, puzzled and angry, responded, “If you took in 30 people, didn't a red flag go up when you started processing claims for 12,000 people [or more] all over the U.S.?” Baer says Adams never answered his question.
But now, Baer and other Florida victims — and insurance agents — are speaking out about a troubling connection: Beech Street and its affiliated networks have hosted most of the leading accused health insurance scams. One reason could be that the networks get a small monthly fee for each of the tens of thousands of customers these bogus plans enroll with them, critics say. Amazingly enough, Beech Street joined forces with an accused phony health plan, Employers Mutual LLC, run by the same executive, James Graf, whose previous plan also used the Beech Street network before it was shut down by the state of California. His various shady health companies had been shut down at least two times, according to an October 2000 California cease-and-desist order against his affiliated operations. His latest enterprise, Employers Mutual, is a Nevada-registered insurer that was shut down by Florida in August 2001 and was later sued for fraud by the U.S. Department of Labor. Its officers, including Graf, are accused of putting $6 million of consumer premiums into their own pockets. The company has denied the federal allegations, but its assets have been frozen by the federal government, and the company is in receivership.
Spokesmen from Beech Street and HealthSmart declined to comment. The health networks, it's important to note, haven't been sued or prosecuted in connection with the alleged health frauds.
But the imprimatur of the Beech Street PPO was one of the reasons that insurance agent Scott Rose promoted TRG to Baer. As Rose recalls, “None of these national plans could be launched without the PPO network. The bogus programs that went to Beech Street were supposed to have rigid registration requirements.” Similarly, as a small agent, he was especially impressed that the respected Dardick Agency enrolled nearly 3,000 of the members of its AEBA group with TRG. Despite his initial skepticism, Rose says, “That started to make a believer out of me. The Dardick people know what they're doing, and they have a lot of credibility.” He also says when he made early inquiries about TRG to the state, he was told there were “no complaints.” So he became a convert when Dardick jumped aboard the TRG bandwagon.
In fact, Anthony Merlino, Dardick's vice president of sales, personally pitched Rose about the value of referring clients to the TRG plan linked to Beech Street. “He made it sound like the greatest thing since 7-Up,” Rose recalls. “Here you had all these people in HMOs, but the doctors were leaving and clients couldn't afford the premiums. Now, they could be transferred to a PPO with a terrific price. It gave everybody what they wanted: good benefits, good choice of doctors, low premiums.” He adds, “The Dardick Agency knew about insurance.” He assumed the executives had carried out “due diligence” research on the company.
Merlino told the Sun-Sentinel last year, “We did all possible due diligence. We weren't out to cheat anyone.”
Rose got a $100 fee for every client, including Baer, whom he referred to the TRG plan and Dardick's AEBA association. “People were joining the association to get the health insurance,” he notes. But all the fine promises collapsed by the end of 2001: “I knew it was a house of cards when the state came in and shut it down. Then, the Dardick agency didn't return my phone calls.” Even today, aggrieved TRG customers who call Dardick are referred by a taped message to a TRG phone number that no longer works.
As Rose sees it, “The entire industry was unprepared for what happened: the regulators, the agents, the health-care networks. All the parties should be part of the resolution, and they all have a responsibility to pay something to people like Richard.” Baer, in turn, says he's on friendly terms with his agent now, even after being steered to TRG, but adds, “Let's say he was stupid, but he didn't do it on purpose.”
For now, Baer is making steady partial payments on his debt and still hoping for some help for exploited consumers, now and in the future. “It shouldn't be my obligation to see if companies are legitimate,” he says. “The state should be there to protect me. That should be their obligation.”
Yet with this week's bust of TRG's executives, Baer also feels that his long quest for justice has been vindicated. “I'm thrilled they took action,” he says of state officials. “Maybe they will get the bad guys in the end.”
