Florida Regulator Halts Unlicensed Health Insurer

Best's Insurance News
May 1, 2002
By Marie Suszynski, associate editor, BestWeek

TALLAHASSEE, Fla. (BestWire) - Florida Treasurer and Insurance Commissioner Tom Gallagher said he has ordered a bogus company to stop sales of its unlicensed health insurance products.

An immediate final order was issued April 25 against Fort Worth, Texas-based American Benefit Plans, which has operated in Florida under more than a dozen different names, the Florida Department of Insurance said. Some 13,000 Floridians are believed to have bought unlicensed plans from the company. It's the fifth unlicensed entity Gallagher has taken action against since February 2001.

The company and its affiliates improperly claimed a federal exemption from state licensure by operating under the ruse of various interest, trade and occupational associations, the department said. UltraMedChoice Health Plan and UEVEBA were among the products the company sold.

Unlicensed entities lure consumers through low rates for health coverage, television and radio ads, and sales representatives who sometimes are licensed, according to the department. The legislature passed a law this year that makes selling unauthorized insurance a third-degree felony, punishable by as long as five years in jail, the department said.

Employers and people who have bought unlicensed health policies have the potential to be left with unpaid claims and difficulty finding new coverage because of pre-existing conditions or lapses in coverage, the department said. Unlicensed companies don't participate in a state guaranty fund, which covers unpaid claims in the event the insurer becomes insolvent. But because American Benefit Plans is based in Texas, creditors can't hit policyholders with unpaid claims, the department said.

Insurance departments in other states have also battled American Benefit Plans and other unlicensed companies. American Benefits Plans, six other unauthorized insurers and four individuals were alleged to be selling illegally in Louisiana, where regulators said they had identified activity in as many as 47 states, with more than 32,000 consumers affected (BestWire, March 8, 2002).

In February, Colorado regulators ordered eight companies, including American Benefit Plans, to stop selling unlicensed health insurance policies in the state (BestWire, Feb. 25, 2002).

In Georgia, bogus companies have been caught selling through multiple-employer welfare arrangement, or MEWAs. The arrangements are another growing problem around the United States, said Georgia Insurance Commissioner John Oxendine, who told O.T.R. Truckers Association Inc. of Cumming, Ga., to stop selling unauthorized health insurance plans in Georgia. O.T.R. and its administrator, M&M Underwriting of Plymouth Meeting, Pa., aren't licensed or authorized to transact business in Georgia, Oxendine said (BestWire, April 3, 2002).