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Doctors can't hound Employers Mutual customers to collect unpaid health claims

Customers of Employers Mutual LLC got good news for a change when the United States District Court of Nevada issued an order that prohibits all hospitals, physicians, pharmacists, and other health care providers from filing or proceeding with any action to collect payment for outstanding health insurance claims.

The order also forbids doctors or their representatives from providing, or threatening to provide, negative reports about Employers Mutual customers to any credit rating or financial reporting agency. The order remains in effect until the final resolution of the case, including any appeals.

According to the United States Department of Labor (DOL), 22,000 customers of Employers Mutual racked up an estimated $4.5 million in unpaid health insurance claims while the principals of the company and its affiliated associations diverted more than $6 million of the health plan's assets into their own personal bank accounts.

The DOL filed a lawsuit in December 2001 in the U.S. District Court of Nevada against the officers of Employers Mutual. The lawsuit alleges that Nicholas E. Angelos, James Lee Graf, Kari Hanson, and William R. Kokott sold health insurance without a license, violating the Employee Income Retirement Security Act (ERISA).

While legitimate ERISA plans allow individual employers to establish self-funded health insurance plans that are exempt from state licensing regulations, plans that provide coverage to more than one unrelated employer do not meet this federal exemption requirement. "Multiple- employer welfare arrangements," or MEWAs, must be licensed by the states in which they do business.

Employers Mutual and the bogus associations it created allegedly collected $14 million in health plan premiums and paid out only $3 million in claims, according to the DOL. The government's lawsuit seeks a court order restoring all losses and illegal profits received by Employers Mutual and its associations. A DOL-initiated court order also removed the plan's principals and appointed independent fiduciary Thomas Dillon to identify all creditors of Employers Mutual.

Several state insurance departments, including the Nevada department, have also filed suit against the bogus company and its officers in order to obtain money defrauded from consumers.

The majority of the company's customers live in California, Colorado, Florida, Georgia, Ohio, Oklahoma, Nevada, and Texas.

A typical health insurance scam

   Where to go for help

Any consumers or employers who need assistance regarding Employers Mutual or its affiliates should contact their state insurance department.

While insurance is a highly regulated industry, imposters do sneak through the cracks. According to the Nevada Department of Insurance, a "typical" health insurance scam attempts to recruit as many local insurance agents as possible to market coverage that is not approved by the state's insurance department. Agents are told the health plan is regulated by federal, not state, law. The tip-off, however, should be that the coverage is usually offered regardless of the applicant's health condition and at lower rates with better benefits than can be found from licensed insurers. According to the Texas Department of Insurance, it is standard procedure for insurance agents and brokers to verify that a new health insurer with which he or she hopes to do business is licensed by simply calling the state's insurance department.

"The scam seeks to collect a large amount of premium as rapidly as possible," says Nevada Insurance Commissioner Alice A. Molasky-Arman. "While claims may be paid initially, the scam will soon begin to delay payment and offer excuses for failure to pay. Unsuspecting customers who thought they were covered for their medical needs are left responsible for huge medical bills."

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