State shuts 2 firms in health field

Rockville companies ran medical plans for self-insured firms

Medical claims unpaid

Other states, U.S. are probing them for alleged dishonesty

January 17, 2001|By M. William Salganik | M. William Salganik,SUN STAFF

The Maryland Insurance Administration ordered the shutdown yesterday of two related Rockville companies, charging them with "illegal and dishonest" health insurance practices.

One of the companies, SAI Med Health Plan LLC, was fined $50,000. Both companies have denied any wrongdoing and indicated they would appeal the closures.

The action by Maryland regulators is part of a still-unraveling national investigation into SAI Med and a related company, SAI Plus LLC.

The Texas Department of Insurance charged SAI Plus LLC last month with operating an unlicensed insurance company, and is seeking a $1 million fine.

Federal investigators have searched SAI Plus offices, and the home of its owner, as part of a criminal probe into charges that include SAI Plus employees shredding health care claims rather than paying them.

And Nevada and Hawaii insurance regulators have issued orders limiting operations by SAI Plus and SAI Med. Maryland and Texas insurance regulators say they have yet to determine the extent of unpaid claims from SAI Plus and SAI Med.

Dr. Karen Meckler, a Columbia psychiatrist whose health plan was administered by SAI Med, said yesterday that her family had seven or eight unpaid claims for care, and is being pursued by a collection agency. She said she has attempted to reach SAI Med: "[But] it's always been difficult to get somebody to return phone calls."

Maryland employers who paid premiums to SAI Med will likely be liable for unpaid claims, said Dennis W. Carroll, Maryland's deputy insurance commissioner.

SAI Med said it covers "probably less than a thousand" Marylanders, while SAI Plus said it has no Maryland customers.

Texas regulators are seeking restitution from SAI Plus for "people left high and dry because their claims weren't paid," said Lee Jones, a spokesman for the Texas Department of Insurance.

Texas regulators said employers there - including several school districts - paid about $13 million in premiums to SAI Plus.

Carroll said Maryland law and regulations do not give regulators the power to order restitution, but "our main objective here is to issue the order to cease and desist."

Maryland Insurance Commissioner Steven B. Larsen yesterday ordered SAI Plus to shut down, noting that the federal Department of Labor, which oversees employee benefit plans, "has probable cause to believe that Maruthi S. Manney, president and CEO of SAI Plus, and others, have participated in a scheme to defraud employers and participants in the SAI Plus Health Plan of an amount in excess of $1,000,000."

Manney, who founded both companies, is still a minority owner of SAI Med, but he is no longer an official of the company, according to Samuel D. Kreiter, president and general counsel for SAI Med.

Larsen charged that SAI Med:

"Has delayed claim payments for a substantial period of time and has failed to pay claims;"

Collected money from employers to buy insurance for employees who rack up large medical bills, but stopped paying the premiums for that insurance, leaving employers liable for claims;

Pooled funds and risk from multiple employers, which violated Maryland law and regulations because SAI Med was only registered to administer single-employer health plans.

Both SAI Med and SAI Plus have been registered in Maryland as administrators of health plans for self-insured employers.

That means that they aren't actually insurance companies. They collect money from employers and pay claims, as an insurance company would do, but it is the employer, not the administrator, who is responsible for higher-than-expected claims.

Generally, the employer pays the administrator to buy a policy to cover high-cost claims, known as "reinsurance" or "stop-loss" coverage.

SAI Med is accused of taking the premiums for those policies, then allowing the policies to lapse for lack of payment.

Employers choose self-insured plans because they can be less costly than regular insurance. Since self-insured plans are largely federally regulated, they are exempt from state mandates for benefits.

Larsen revoked each company's registration as an administrator and ordered each company to "cease and desist from engaging in the unauthorized business of insurance."

The companies have 30 days to appeal his closure orders.

Robert Nealon, a lawyer representing SAI Plus, said, "We will have no comment until all matters are resolved, but we also believe that all matters will be resolved favorably for SAI Plus."

SAI Plus has filed a denial of the charges in Texas, where a hearing is scheduled for March.

Kreiter said the charges were "completely inaccurate" and that his company, SAI Med, had been "swept up because of its name and its historic relationship" to SAI Plus.

Kreiter said SAI Med "did purchase stop-loss coverage," as it had promised employers, but "there were some administrative snafus with the brokers." The coverage may have lapsed at some point, he said, but SAI Med has since bought new policies for employers that want them.

He said SAI Med pays claims promptly, as long as the employers have provided the necessary funds, but there may have been some delays in payments if employers didn't pay what they were supposed to. And the SAI Med president said he had not improperly pooled any funds.

SAI Med covers 5,000 to 7,000 people for 100 or so employers in about 10 states, Kreiter said. The company employs about 30.

Carroll said Maryland insurance investigators had been looking at the two companies for several months, based on about 24 complaints from doctors, employers and individuals who said claims for health care had not been paid.

Gloria Vanderhorst said she has experienced difficulties with SAI Med both as a psychologist practicing in Towson and as a patient.

Her family had been insured with SAI Med through her husband's work, and the company would delay or refuse to pay for claims, even for doctor visits it had approved in advance, she said.

Sun staff writer Stacey Hirsh contributed to this article.

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