Friday, January 8, 2010

WA orders Serve America Assurance, American Trade Association, and other companies to stop selling illegal health coverage

Washington state Insurance Commissioner Mike Kreidler has ordered five companies and seven individuals to stop selling unauthorized health insurance and discount plans in Washington state.
The entities include Serve America Assurance, Ltd. and American Trade Association. Both have been the subject of state consumer protection orders and warnings in other states, including Oklahoma, North Carolina, Indiana, Connecticut, Arkansas and Michigan.

“These companies are not playing by the rules that our state set up to protect consumers,” said Kreidler, who heads the agency that regulates insurance in Washington state. “With authorized companies, we review their policies and finances to make sure that they’ll be able to make good on their promises. With these companies, consumers have no such assurances.”

The order includes Serve America Assurance, Ltd., Beema-Pakistan Company, Ltd., American Trade Association, Smart Data Solutions, and Real Benefits Association. The individuals named in the order include Bart Posey, Colin Youell, William Worthy II, Obed Kirkpatrick, Richard Backman, David Clark, and Saifuddin Ahmed. None are properly licensed to sell health insurance or discount plan products.

Kreidler is ordering the companies and individuals to:

- turn over a list of all their Washington insurance-related customers,

-report all premiums paid by those consumers,

-inform their Washington customers about the cease-and-desist order,

-and, upon request by the consumer, to replace any improperly sold insurance with a policy from an authorized insurer.

“In many of these cases, the folks who are buying these bargain-basement products are the people who can least afford to be taken advantage of,” said Kreidler.

The Insurance Commissioner’s office knows of more than 70 Washingtonians who purchased coverage from the companies named in the order. Some have reported problems with delayed or unpaid claims.

Nationwide, more than 10,000 consumers are believed to have purchased this coverage at a cost last year of more than $14 million. The respondents “have acted in concert” to sell Washingtonians a product that consists of a mix of insurance and medical care discounts according to a cease and desist order issued by Kreidler’s office.. But this product is not authorized in the state, and the sellers are misrepresenting it as comprehensive health coverage. (For a typical pitch from a `broker’ – or marketer -- selling American Trade Association coverage, see this video.)

Based on faxed solicitations and the statements of telemarketers selling the coverage, the order states, “consumers are led to believe that the product offered constitutes comprehensive health insurance, and the bank and credit card accounts of consumers who agree to purchase the product…are immediately debited.”

The plans being sold cost at least $199 a month for individuals and $369 for families. A typical faxed sales pitch offered “hospitalization,” primary, specialist, or chiropractic care for just “$25 at time of visit,” “huge savings on name brand and generic drugs,” “up to 60% savings” on vision and hearing care, and coverage of root canals, X-rays, MRIs, EKGs, CT scans, intensive care stays and more. It even promises “pre existing conditions OK… You will be enrolled!”

To protect consumers, Washington law requires people selling insurance to be licensed. Insurance must also be authorized by the insurance commissioner’s office, which looks at policy language, financial stability and other factors to make sure that companies can make good on their promises.

“The whole point of regulating the industry is to ensure that consumers are not left holding the bag when they have a claim,” said Kreidler. Licensed sellers and authorized insurers are required to comply with laws designed to protect consumers.

In this case, the sellers were not licensed, the product being offered was not authorized, and it was falsely advertised as comprehensive coverage, among multiple other violations.

The five companies and seven individuals have been ordered to immediately stop:

-Engaging in the unauthorized business of insurance in the state of Washington,

-or soliciting Washingtonians to buy the coverage by e-mail, fax, phone, mail or website.

To read the complete cease-and-desist order, please click here.

UPDATE: The Better Business Bureau reports that Smart Data Solutions, LLC has an "F" rating from its Nashville office.

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