Aaron Gonzalez, a former South Texas insurance agent, was to be sentenced for his crimes on July 23. His sentencing, however, was postponed again “until further notice.” The Wheels of Justice, it seems, turns ever so slowly.

One wonders why sentencing takes so long. Could it have to do with an on-going investigation assisted by cooperating witnesses?

“Half Guilty, Half Pregnant” Arnulfo Olivarez, another South Texas insurance agent, has had his sentencing postponed numerous times during the past two years. His next scheduled sentencing is August 22 in McAllen, Texas.

Published Friday, April 04, 2008 2:12 AM

Insurance agent accused of bribery

Associated Press

HARLINGEN — A Harlingen insurance agent is accused in a federal indictment of providing cash, plane tickets and condo rentals to some Edcouch-Elsa school district officials in exchange for public contracts.

Arnulfo Olivarez was named in a three-count federal indictment returned last month.

According to the indictment, the bribes were made to then-school board President Aaron Luiz Gonzalez and other district officials between 1999 and 2005 in exchange for votes on insurance contracts with the district.

Investigators said the kickbacks were valued at more than $26,000.

Olivarez, owner of Insurance Associates of the Valley, is one of three contractors indicted in connection with a similar scheme with the Pharr-San Juan-Alamo school board.

Federal prosecutors say Olivarez often used illegal means to get business for the insurance companies that employed him.

Gonzalez, who pleaded guilty to extortion charges in a similar case in June 2006, was not charged in the latest case under a plea deal with prosecutors, The Monitor in McAllen reported in its Friday editions.

Olivarez faces charges of conspiracy, bribery and mail fraud in the Edcouch-Elsa and PSJA cases and has pleaded not guilty in both. If convicted on all counts, he could face 20 years in prison and $250,000 in fines.

J.J. Ybarra, the current Edcouch-Elsa school board president, said the district now brokers its contracts directly with insurance companies.

“This activity is all from several years back,” he told the newspaper. “We had a lot of obstacles, but we just keep moving on.”

JUPITER, FL, Jul 22 (MARKET WIRE) –  The new Patient Protection and Affordable Care Act is expected to squeeze the profits and finances of the nation’s smaller health insurers, forcing many to withdraw from the market, be acquired, or fail. However, most of the nation’s largest insurers have the capital and efficiencies needed to handle the expanded coverage and buy out the smaller companies, according to a new study by Weiss Ratings, the nation’s only provider of independent insurance company ratings. ”Sweeping changes mandated by health care reform, such as the removal of certain limits and mandated coverage for pre-existing conditions, will inevitably force health insurers to spend more on medical care,” commented Martin D. Weiss, president of Weiss Ratings. “Most large health insurers will be able to handle it. But we are concerned that weaker, less profitable insurers will be forced out of the market, reducing competition and ultimately leading to fewer choices and higher premiums for consumers.”

The Weiss Ratings study covers 585 of the nation’s health insurers, including 353 companies that already meet the mandated requirement going into effect next year to pay out at least 85% of their premium dollars in medical expenses.

Among the 585 companies, 95, or 16.2%, received a Weiss Rating of D+ (weak) or lower, putting them at risk of future financial difficulties caused by higher medical costs, a weaker economy or other pressures. In addition, another 186, or 31.8% of the industry, are rated C+, C or C- (fair), many of which could also have some difficulty absorbing the additional costs mandated by health care reform.

Weiss added: “Smaller insurers with less capital and fewer efficiencies of scale are more likely to suffer difficulties or even go out of business due to health care reform. Already, even before any additional expenses mandated by health care reform, 174 health insurers reported losses last year. In contrast, the largest, most efficient insurers with abundant capital and solid profits are not only in a position to absorb the higher expenses mandated by reform but could also expand their market share by buying up the weaker companies.” 

Among the nation’s 16 largest health insurers, controlling 45.7% of the industry’s assets, the nation’s largest health insurer, Kaiser Foundation Health Plan Inc. with $37.8 billion in assets merited a Weiss rating of A- (excellent), while the second largest, Health Care Service Corp., with $11.4 billion in assets, was rated A+. Also receiving excellent grades were Blue Cross Blue Shield of NC (A+), Blue Cross Blue Shield of SC (A-), Blue Cross of California (A+), California Physicians’ Service (A), Community Insurance Co (A-) plus two New York companies — Empire HealthChoice Assurance (A-) and Excellus Health Plan (A+). None of the 16 largest were in the weak (D+ or lower) or fair (C, C+, C-) category. 

To help consumers avoid the weakest health insurers and find the strongest licensed to do business in their state, Weiss Ratings has released its lists of the 118 strongest and 100 weakest health insurance companies. Consumers can immediately receive both lists at no charge by providing their email address at www.weissratings.com/healthlists. 

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Extract from Aetna’s Health Reform Weekly (Week of 7/26/10) Following is an update to the status of OK HB 2437-

 OKLAHOMA: Insurance Commissioner Kim Holland filed a petition with the Oklahoma Supreme Court last week seeking to prevent the application of a new tax on health plans enacted earlier this year. The petition challenges the new law’s constitutionality. The legislation creates the Health Carrier Access Payment Revolving Fund and imposes a tax of 1 percent on all paid claims for individual and employment-based health plans, to be collected by the Insurance Department beginning August 27. The Oklahoma Health Care Authority will disperse an estimated $240 million in additional funds to pay for the state’s Medicaid program. The petition argues that the state constitution requires that any revenue measures must pass at least three-quarters of the legislature or be submitted to a vote of the people. The new health plan tax did not. Additionally, the petition argues that the bill violates the state law that prohibits the passage of any revenue bill within five days of adjournment. Commissioner Holland also questioned the transparency and accountability of the legislation as well as the state’s authority to tax self-insured plans that are fully funded by employers and subject to federal ERISA law. Other large self-funded plan entities are expected to join her lawsuit and challenge the law on ERISA grounds as well. Aetna will be closely monitoring the litigation going forward.

Molly Mulebriar reports that further investigation indicates that the TPA owns the brokerage for which the group’s insurance agent works for.

“Bill, found documentation that the TPA incorporated XXXXXX Insurance Agency in June 2001. M M works for the agency and is the group’s insurance agent. So what you have here is a TPA that owns the insurance agency that placed the business, and also has a profit/loss marketing agreement with the stop loss carrier which currently insures the group. A definite conflict of interest.”

“I called the three MGU’s that the SEC 10k report shows are the carrier’s agents, and none show record of insuring the group. I then called the carrier direct and left a message. I am awaiting their return phone call. At this point, I am not asserting that there is no stop loss in place, and I certainly hope that is not the case. I will get down to the bottom of this and report back to you by week end.”

“Thanks for the check – I need a new dress and this will help.”

BELOW IS THE ORIGINAL POST

We recently aquired a new client in Texas that is self-funded. Our task is to evaluate the current plan and make recommendations.

The current TPA is Texas based, but relatively unknown. The stop loss contract in force is between the employer and the carrier but was brokered by the TPA several years ago.

In reviewing the existing program, we asked for the carrier’s underwriter notes from the TPA. The TPA refused to release the underwriter notes, as well as refused to disclose the name and telephone number of the underwriter handling this case. We found this suspicious and unprecedented. Certainly, the employer has a right to this information. The TPA was, after all, not a party to the stop loss contract. They simply acted as an insurance broker in placing the cover.

Usually, when a TPA, carrier or insurance agent refuses to give you information proprietary to you, then you are probably paying too much. At least that has been our experience gleaned over the past 35 years in the business.

So, we wondered, what was the TPA hiding?

We compared the Stop Loss Contract rates to the rates being billed by the TPA on behalf of the stop loss carrier. They did not match. We reviewed the loss runs produced by the TPA and noticed that the contract type on the worksheets indicated, in tiny print, that the specific contract was an aggregating specific. So we went back to the actual Stop Loss Contract and noticed that under Options, the box next to the Aggregating Specific Option was not marked, but next to it in the margin it was, or so it seemed.  Then, we discovered that on the past four renewals, the Stop Loss Contract was renewed on a 12/12 basis each year. That is unusual and could put the employer at risk every renewal (but save the stop loss carrier added exposure therefore better chance for profits).

So, we employed Molly Mulebriar, investigative reporterette, to check into this. Her initial report is below:

“Bill, did some quick checking this morning over a bloody mary at Star Bucks. I checked the Security & Exchange Commission (SEC) 10k report for XXXXXXXX XXXXXXXXX XXXXXXX (name of stop loss carrier) through 12/31/2009 and found that there is a marketing agreement between them and XXXXXXXXX XXXXXX XXXXXX (TPA) that expires 12/31/2014. Among other things, in exchange for $2.5 million the carrier shares underwriting profits and losses with the TPA of 35%, with bonus compensation payable annually based on a formula of profit/loss ratio of the entire block of business generated by the TPA.”

“I also found out that in 2007 the TPA got into a tift with a mutual insurance company, a nasty lawsuit was filed, and the carrier pulled all their business from the TPA and sued for repayment of a promissory note totaling about $4 million. So it seems, according to the SEC 10 k report referenced above, that the TPA moved their block of businss to the new carrier and negotiated a profit and loss sharing arrangement to “sweeten the offer.”

“I also found that about the same year, the Texas Department of Insurance issued a Commissioners Order against the TPA including a fine of over $150,000. Seems there was some sort of scheme in play to stiff the Texas Risk Pool to the tune of over $12 million by siphoning off poor risks within an employer group to the small group fully insured market.”

“This is amazing stuff. Will continue to investigate. When are you going to pay me for my time and efforts on this?”

Editor’s Note: We hesitated to put this story on our blog since there is definitly more to learn here. But to molify Molly, we felt the urgency of reporting this to our three regular readers. More to follow, with actual name of the TPA and a copy of the Commissioners Orders to be posted. Regarding Mulebriar’s quest for compensation – she is on a retainer, rather sizable. We have to continuously remind her of that.

Health Care Reform will end PPO’s as we know them today. Effective January 1, 2012, “Insurers must submit annual reports to Secretary on disease management, care coordination, hospital readmission rates, patient safety and provider rate reimbursement structures.”

Provider rate reimbursement structures, or fees, will become part of the public domain and no longer hidden in secretive PPO contracts.

The secret world of PPO provider contracts will be no more.

Sometimes change is good. This is good.

It started three years ago with employers beginning to realize the fallacy of PPO network discount “savings” and finally doing something about it. Bill Miller BBQ, a San Antonio based restuarant chain, was the first employer in Texas take the initiative which started the Cost-Plus revolution (Bill Miller Forbes).

Relying on less providers to provide health care makes sense for both the consumer and the provider. It has certainly worked well for Bill Miller BBQ and over 45 other employer groups in Texas that have followed their lead.

Providers get paid a fair and reasonable fee, quickly and hassel free while consumers enjoy significant savings. And, the situation gets even better with improved benefits to the employees, and less Accounts Receivable problems for the providers.

With the savings realized, calendar year deductibles can be removed, hard to track out-of-pocket expenses are eliminated, replaced with a co-pay system in place for all benefits, including hospital admissions. Patients know up front what their cost will be, and providers know up front what their reimbursement will be too. No secretive PPO contracts to worry about – total transparency.

 Now that Health Care Reform has passed, carriers are scrambling to make sense of the bill, and devise strategies to survive competitively in the upcoming months and years. Carriers are beginning to realize that “Less is Better” too, as outlined in a recent article (http://www.nytimes.com/2010/07/18/business/18choice.html).

In an earlier posting, we noted that there will be tremendous opportunities for those of us in the insurance industry that have the ability to think out of the box and seize upon events as they unfold in the marketplace. We promised to post a piece on “Opportunities Before Us that Will Make Us Millionaires” in total, however with things moving so rapidly these days, we decided to provide this posting as a hint of future postings to be made here for the benefit of our four readers (yes, we added one new reader over the weekend – thank you Dino).

We recently aquired a new client in Texas that is self-funded. Our task is to evaluate the current plan and make recommendations.

The current TPA is Texas based, but relatively unknown. The stop loss contract in force is between the employer and the carrier but was brokered by the TPA several years ago.

In reviewing the existing program, we asked for the carrier’s underwriter notes from the TPA. The TPA refused to release the underwriter notes, as well as refused to disclose the name and telephone number of the underwriter handling this case. We found this suspicious and unprecedented. Certainly, the employer has a right to this information. The TPA was, after all, not a party to the stop loss contract. They simply acted as an insurance broker in placing the cover.

Usually, when a TPA, carrier or insurance agent refuses to give you information proprietary to you, then you are probably paying too much. At least that has been our experience gleaned over the past 35 years in the business.

So, we wondered, what was the TPA hiding?

We compared the Stop Loss Contract rates to the rates being billed by the TPA on behalf of the stop loss carrier. They did not match. We reviewed the loss runs produced by the TPA and noticed that the contract type on the worksheets indicated, in tiny print, that the specific contract was an aggregating specific. So we went back to the actual Stop Loss Contract and noticed that under Options, the box next to the Aggregating Specific Option was not marked, but next to it in the margin it was, or so it seemed.  Then, we discovered that on the past four renewals, the Stop Loss Contract was renewed on a 12/12 basis each year. That is unusual and could put the employer at risk every renewal (but save the stop loss carrier added exposure therefore better chance for profits).

So, we employed Molly Mulebriar, investigative reporterette, to check into this. Her initial report is below:

“Bill, did some quick checking this morning over a bloody mary at Star Bucks. I checked the Security & Exchange Commission (SEC) 10k report for XXXXXXXX XXXXXXXXX XXXXXXX (name of stop loss carrier) through 12/31/2009 and found that there is a marketing agreement between them and XXXXXXXXX XXXXXX XXXXXX (TPA) that expires 12/31/2014. Among other things, in exchange for $2.5 million the carrier shares underwriting profits and losses with the TPA of 35%, with bonus compensation payable annually based on a formula of profit/loss ratio of the entire block of business generated by the TPA.”

“I also found out that in 2007 the TPA got into a tift with a mutual insurance company, a nasty lawsuit was filed, and the carrier pulled all their business from the TPA and sued for repayment of a promissory note totaling about $4 million. So it seems, according to the SEC 10 k report referenced above, that the TPA moved their block of businss to the new carrier and negotiated a profit and loss sharing arrangement to “sweeten the offer.”

“I also found that about the same year, the Texas Department of Insurance issued a Commissioners Order against the TPA including a fine of over $150,000. Seems there was some sort of scheme in play to stiff the Texas Risk Pool to the tune of over $12 million by siphoning off poor risks within an employer group to the small group fully insured market.”

“This is amazing stuff. Will continue to investigate. When are you going to pay me for my time and efforts on this?”

Editor’s Note: We hesitated to put this story on our blog since there is definitly more to learn here. But to molify Molly, we felt the urgency of reporting this to our three regular readers. More to follow, with actual name of the TPA and a copy of the Commissioners Orders to be posted. Regarding Mulebriar’s quest for compensation – she is on a retainer, rather sizable. We have to continuously remind her of that.

A major health insurance carrier operating in Texas has made a corporate decision to expand their self-funded business and is preparing to exit the fully-insured market within the next 18 months. Final decison to exit the fully-insured market will be made once final regulations are issued on the 80-85% minimum loss ratio requirement due to take effect on all renewals after January 1, 2011.

In our opinion, we will see unprecedented growth in self-funded plans due to Health Care Reform. Carriers and third party administrators will compete for record keeping positions with employer groups.

Stop loss carriers will reap a bonanza in new sales opportunities. More will enter the market than leave. Rate competition will create a soft market initially.

In a future posting, we will provide our definitive predictions of the direction of health care delivery in the near term, as well as outline new and lucrative business opportunities available to those with the ability to think out of the box with tempered risk tolerance to be assumed as a key element of success.