FL orders unlicensed health insurer to stop selling policies

By Vicki Lankarge
insure.com

Florida Treasurer and Insurance Commissioner Tom Gallagher has ordered N.A.P.T. — a Pennsylvania-based association with more than a dozen "identities" — to stop selling health insurance in Florida because it is not licensed to do business in the state. Regulators say they believe "tens of thousands" of Florida residents may have purchased policies with N.A.P.T. or its affiliated organizations. Gallagher has also demanded that N.A.P.T. immediately turn over its claims-handling process to a licensed third-party administrator.

The association primarily sells policies under the initials N.A.P.T. but it has also sold insurance under numerous other names, including the National Association of Professionals & Technicians and the National Association of Professional Truckers, according to Tami Torres, a spokesperson for the Florida Department of Insurance. Torres says department regulators believe that these associations have been selling unauthorized health insurance policies since 1999 to the self-employed and employers that range from small groups all the way up to large groups with more than 100 employees.

None of the affiliated associations nor the plan administrator, David Weinstein, has ever been licensed as an insurer in Florida, according to Torres. In addition, Torres says the department does not currently know how many policyholders have purchased the illegal policies in Florida because N.A.P.T. is not cooperating with regulators.

"An unlicensed entity like N.A.P.T. is luring in employers with low rates for health insurance coverage, often through slick TV advertising, but what they are really offering is a false sense of security," Gallagher says. "Unlicensed entities are not regulated, may not be actuarially sound, and are not required to guarantee payment of claims if their company goes bankrupt."

Bogus ERISA policies

Florida insurance regulators claim that N.A.P.T. is falsely marketing to insurance agents and consumers that they are a qualified Employee Retirement Income Security Act (ERISA) plan, which under federal law is generally exempt from state regulation. An ERISA plan allows an individual employer to establish and self-fund a health plan (and assume the financial risk) for its own employees. However, any plan that sells insurance policies to more than one employer does not meet the federal exemption requirement and must be licensed and regulated by the state. Gallagher issued the final cease and desist order to N.A.P.T. on March 30, 2001. It requires the organization to:

Notify current policyholders that they should obtain new coverage.

Turn over its claims-handling processes to a qualified third-party administrator within 15 days.

Continue to pay claims until further order of the Florida Department of Insurance.

According to Torres, N.A.P.T. and Weinstein have five days to request a hearing to appeal the order. "Under the order, the association remains responsible for honoring the policies it has issued," says Gallagher. "Nevertheless, I believe it is in the policyholders' best interests to look for new coverage. This insurer has no license and therefore it has not undergone the regulatory scrutiny that licensed companies do."

Consumers and insurance agents blow the whistle

Florida insurance department regulators were made aware of the unlicensed entity through consumer and insurance agent complaints of policy cancellations for no reason and without proper notice, as well as slow — and sometimes no — payment of claims. According to Torres, insurance agents also called to complain that their legitimate business was being siphoned away from them by N.A.P.T. and its affiliated organizations, which were offering group health insurance policies at extremely low rates.

Although N.A.P.T. and its affiliated associations are not under criminal investigation at this time, the Florida Department of Insurance has not ruled out filing criminal charges once the appeal period is over.