Forest Hill company fined in Blues scheme

December 19, 2007|By Laura Smitherman | Laura Smitherman,Sun reporter

A Forest Hill business that sold CareFirst BlueCross BlueShield health insurance policies orchestrated a scheme to overcharge policyholders and pocket the money, according to the Maryland Insurance Administration.

The agency yesterday revoked licenses for Hofmann Benefit Solutions and its owner Cullen D. Hofmann and ordered them to pay $60,000 in fines.

P. Todd Cioni, associate commissioner at the insurance administration, said that as many as 50 small employers were snared in the scheme in which consumers overpaid for insurance by an estimated tens of thousands of dollars.

The administration also ordered CareFirst to conduct an audit of the accounts handled by Hofmann and to reimburse over-billed consumers. CareFirst had referred the case to the agency.

Neither Hofmann nor his lawyer could be reached.

According to Cioni, Hofmann submitted false paperwork to CareFirst through third-party administrators Kelly & Associates Insurance Group or BenefitMall. Hofmann allegedly added young, fictitious employees to bring down the average age of the small employer's group. The aim was to lower the premium quote because younger people are less expensive to insure. He also substituted his address for the employer's address, Cioni said.

When an artificially low CareFirst bill was generated, it would go to Hofmann, according to Cioni. He generated a new bill that he marked higher and sent to the small employer, and he asked that the check be made out to his business, according to Cioni. He then paid the CareFirst bill through Kelly and BenefitMall and pocketed the difference, Cioni said.

Kelly and BenefitMall were fined $10,000 each for lax oversight, according to the administration. Francis X. Kelly III, president and CEO of Kelly & Associates, said they were "just as duped as any consumer" and that he plans to appeal. Officials with BenefitMall could not be reached to comment.

laura.smitherman@baltsun.com

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