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Florida Doi Issues Warning to Consumers: Stay Away from Unlicensed Insurance Entities

4/9/2002

TALLAHASSEE - The Florida Department of Insurance is launching a media campaign warning employers and individuals to stay away from buying insurance from unlicensed entities. The campaign's message is: "Verify before you buy."

In the past year, Florida Treasurer and Insurance Commissioner Tom Gallagher has taken action against four unlicensed entities that lured as many as 15,000 health insurance buyers into plans that stopped paying claims and went out of business when the incoming premiums were no longer enough to cover costs.

"Employers and consumers must take the time to be sure they are dealing with a licensed insurance entity," Gallagher said. "It's a simple step to ensure that you, your employers and family will have coverage when it's needed."

The department is releasing a public service announcement and a video news release to television news markets throughout Florida. The VNR features Deerfield Beach resident Richard Baer who bought health insurance for his small business from T.R.G. Marketing Group, an unlicensed entity that went out of business in November. Baer thought he was covered when he underwent heart surgery last year, but now he is receiving collection notices for more than $50,000 in unpaid claims.

Gallagher said he will seek revocation of the licenses of any agents caught knowingly selling unlicensed insurance, and will also pursue criminal charges. The Legislature this year passed a law increasing the penalty for a licensed agent selling unauthorized insurance from a first-degree misdemeanor to a third-degree felony, punishable by up to five years in jail.

Under Florida law, if an unlicensed insurer fails to pay claims, agents who sold the unlicensed coverage may be held responsible for unpaid claims. The vast majority of Florida agents do not sell these unlicensed products.

Both employers and agents are enticed by the low premiums unlicensed entities often charge, but the rates may not be actuarially sound and money is not set aside for reserves. Because unlicensed entities do not participate in a state guaranty fund - a fund, to which licensed companies must contribute, covering unpaid claims in the event of bankruptcy - the policyholders in unlicensed plans are usually left with the responsibility for unpaid claims when the businesses fold.

In an ongoing crackdown on the sale of unauthorized health insurance in the state, Gallagher in February suspended the licenses of two agents suspected of selling insurance policies for T.R.G., of Greenwood, Ind. The two agents allegedly rolled the T.R.G. policyholders into other unlicensed plans when T.R.G. stopped doing business in Florida.

In February 2001, two principles of Well America Group, Inc., a Miami-based company that also sold health insurance to large employers, were charged with transacting insurance without a license, and an agent who marketed Well America's products is facing administrative action against his license. Well America went out of business in August 2000, leaving $3.7 million in unpaid claims.

N.A.P.T., a Pennsylvania organization that was shut down in March 2001, is believed to have sold insurance policies under numerous names including the National Association of Professionals & Technicians, the National Association of Professional Truckers, and the National Association of Professional Traders. None of the affiliated associations nor the administrator had ever been licensed as an insurer in Florida.

Then last August, Gallagher ordered Nevada-based Employers Mutual to stop selling its unauthorized health insurance in Florida. Employers Mutual was marketing to employers in a variety of industries and trades, from automotive dealers to food service workers.

These entities claimed to be exempt from state licensing requirements under the federal Employers Retirement Income Security Act (ERISA). A legitimate ERISA plan allows an individual employer, union or association to establish and self-insure a health plan for its own employees or members. However, any plan that provides coverage to more than one unrelated employer or group does not meet the federal exemption requirement and must be licensed by the state.

Employers and individuals shopping for health insurance coverage are urged to check with the Department of Insurance to be sure they are dealing not only with a Florida-licensed insurance company but also with a Florida-licensed insurance agent. Licensed agents must pass a test demonstrating a basic understanding of the business of insurance and state law. Further, licensed insurance companies typically will not work with an unlicensed agent and may not honor a contract signed by one.

The department's Consumer Helpline, at 1-800-342-2762, is staffed Monday through Friday from 8 a.m. to 7 p.m.


NOTE TO MEDIA: The video news release and public service announcement can be previewed via the department's website at www.fldfs.com. For a VHS or Beta copy of either the VNR or PSA, contact the DOI Press Office at 850-413-2842.