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Gallagher Orders Unlicensed Company to Stop Selling Health Insurance

8/14/2001

TALLAHASSEE – In an ongoing crackdown on unlicensed insurance sales, State Treasurer and Insurance Commissioner Tom Gallagher today ordered a Nevada-based company to stop selling unauthorized health insurance policies in Florida. The policies were being marketed to employers in a variety of industries and trades, from automotive dealers to food service workers.

The order further requires Employers Mutual, L.L.C. to pay all outstanding claims and to notify policyholders that they should obtain new coverage immediately. The Department of Insurance began hearing complaints this spring following similar action against N.A.P.T., another unlicensed insurer, in March. Department regulators now suspect that after being ordered to shut down its operations, N.A.P.T. may have directed its policyholders to Employers Mutual.

"Employers are looking for the best deal for their companies and their employees, and these sham operations use that to their advantage," Gallagher said. "They offer deals that seem too good to be true, and they are. The reason they can offer attention-getting premiums is that they may have no intention of staying in business for long and, as a result, do not bother with details such as getting a license or having appropriate reserves to pay claims."

This is the third company this year that Gallagher has taken action against for selling unauthorized insurance.

Department regulators say Employers Mutual and two identified principles – William R. Kokott and Nicholas E. Angelos, both of Carson City, Nevada – may have been selling unauthorized multiple employer welfare arrangement policies in Florida for as much as a year. Neither the company nor Kokott or Angelos has ever held a Florida insurance license.

Multiple employer welfare arrangements, or MEWAs, are plans created by two or more employers to furnish employee benefits, such as health insurance. But department regulators said Employer Mutual's plans are being marketed through insurance agents who are leading employers to believe they are establishing a qualified Employee Retirement Income Security Act (ERISA) plan.

A legitimate ERISA plan allows an individual employer to establish and self-insure a health plan for its own employees, and under federal law, ERISA plans may be exempt from state insurance regulation. However, any plan that provides coverage to more than one unrelated employer, as is the case with a MEWA, does not meet the federal exemption requirement and must be licensed by the state.

Employers Mutual required policyholders to enroll at an extra charge in one of various associations, all of which share the same Carson City, Nevada address and were headed by Kokott and Angelos. The following is a list of the associations the department has been made aware of so far:

American Association of Agriculture

American Coalition of Consumers

Association of Automotive Dealers & Mechanics

Association of Barristers & Legal Aides

Association of Cosmetologists

Association of Educators

Association of Health Care Workers

Association of Manufacturers & Wholesalers

Association of Real Estate Agents

Association of Retail Sellers

Communication Trade Workers Association

Construction Trade Workers Association

Culinary and Food Service Workers Association

National Association of Hospitality & Innkeepers

National Association of Transportation Workers

The department is still trying to determine the scope of the transactions and the number of potential victims. Gallagher's order requires Employers Mutual to provide that information within 15 days.

Licensed insurance agents who sell unauthorized insurance products may be subject to disciplinary action, including license revocation, and could face criminal charges. Further, if an unlicensed insurer fails to pay claims, agents may be held responsible for unpaid claims. Several agents have been identified as having solicited or sold Employers Mutual policies.

N.A.P.T., the Pennsylvania organization that was shut down in March, is believed to have also 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, David Weinstein, 42, had ever been licensed as an insurer in Florida.

In February, 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 now 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.

Consumers with questions can call the department's Consumer Helpline at 1-800-342-2762


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