Hawaii, Texas Insurance Departments Take Action

December 8, 2000

The Hawaii Insurance Division has issued a cease and desist order against Darren Larson, the organizer of the insolvent and unauthorized health insurer Hawaii HealthCare Alliance, and owner of Design Benefits Insurance Services. Law enforcement officers served the cease and desist orders to Larson’s Texas residence on Monday. Among other things, the orders demand that Larson cease further referrals to the SAI Plus Health Insurance Plan and the TRG Marketing Plan, which are unauthorized insurance products.

The division has also initiated proceedings to revoke Larson’s general agent and subagent licenses to do insurance business in Hawaii and to impose a $100,000 fine for illegal activities related to the organization and operation of HHA and other violations of state insurance laws.

Hawaii Insurance Commissioner Wayne Metcalf said SAI is also the subject of investigations by the U.S. Department of Labor, the FBI, the U.S. Postal Inspection Service and the Texas Department of Insurance for possible criminal and fraudulent acts. Through these investigations, two separate legal actions have emerged.

TDI seeks to impose a $1 million fine on SAI and bar it from conducting business in Texas, and the investigators from the labor department obtained a search warrant for financial and operational records on SAI business premises as well as the residences of the owners of SAI.

Texas and the federal government allege that SAI marketed and sold group health insurance plans to many employers, including several Texas public school districts, representing the plans as “fully insured.” SAI collected the premiums from employers but allegedly never remitted them to an insurer to buy coverage. Instead, SAI pocketed the premium money. TDI also alleges that SAI market unauthorized group health plans, failed to pay claims in a timely manner and improperly denied claims.

Federal investigators also allege that SAI employees shredded claims before entering them into the claims processing system, then denied the claim after it had been resubmitted on the grounds that the consumer failed to meet the 90-day filing limit; and forged applications for insurance to support denials of claims on the basis that preexisting conditions were not disclosed by the consumer in the initial application process.

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