Texas Commissioner Jose Montemayor has levied fines totaling $12.5 million against the operators and chief marketer of a fraudulent health care plan that reportedly enrolled approximately 7,200 Texas residents. The unlicensed plan, called Employers Mutual LLC (EM), allegedly left patients, physicians and providers with up to $50 million in unpaid claims, nationwide. One unpaid Texas claim totaled $70,000.
“Selling insurance without a license or other authorization from TDI is a red flag that nearly always signals criminal intent,” Montemayor said. “Unauthorized insurers have a dismal record of collecting premiums, paying a few small claims to build confidence, then vanishing when substantial claims start to come in.”
Montemayor’s order fined William R. Kokott and Nicholas E. Angelos, both of Carson City, Nevada, $5 million each. It levied a $2.5 million fine against American Benefit Society (ABS), later renamed Association Benefit Society of Turnersville, New Jersey. They have 20 days to request a rehearing – a necessary step if they wish to appeal the order to the courts.
Kokott and Angelos were reportedly EM´s sole managers and officers. Kokott served as chairman.
ABS marketed EM’s alleged bogus health plans in Texas under a contract paying a 7 percent commission on premiums collected from employers and plan members. Agents recruited by ABS received commissions in the range of 30 percent to 40 percent.
To date, Montemayor has fined more than 30 agents who sold the EM plan and ordered them to pay the unpaid health care claims of their victims. The licenses of many of those agents have reportedly been revoked. Additional agent cases are pending.
Thursday´s order reportedly found that Kokott, Angelos and ABS had illegally engaged in the business of insurance in Texas without the licenses required by state law and had misrepresented EM as a legitimate insurance plan. Montemayor ordered EM in October 2001 to stop selling insurance in Texas.
“Forming a company to engage in the unauthorized business of insurance is the most serious violation of the Insurance Code,” added Montemayor.
EM and its principals also reportedly are under a Nevada federal court´s preliminary injunction halting its nationwide insurance activities and freezing its assets.
Under that order, any fines or forfeitures collected from Kokott and Angelos must go to an “independent fiduciary” appointed by the court to gather the fraudulent health care scheme´s funds and use them to pay claims and other expenses. Alternatively, states must defer collection until the federal court case is concluded and any judgment has been fully collected. ABS is not affected by that provision in the order.
The federal court order also prohibits physicians and health care providers from taking collection actions against patients insured by EM or submitting negative reports about them to credit rating agencies.
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