Tuesday, June 06, 2006

John Curry to Damon Asbury: Do STRS associates know about United Healthcare lawsuit, and is STRS money involved?

From John Curry to Damon Asbury, June 6, 2006
Subject: United Healthcare and others

If I'm correct, I believe STRS uses United Healthcare to insure their (actually our) "Associates" with medical insurance. Do we or did we have any dealings with Joseph James & Associates or Grady Enterprises? What guarantee do we have that a situation similar to this alleged incident didn't also involve STRS monies? Is this being studied?
I realize that you may very well not comment should litigation be pending and I understand that, but I also believe that STRS actives/retirees need to be aware of this news item. John
Broker, insurer accused of fraud
Tuesday, June 06, 2006

Ohio’s sixth-largest school district says it was a victim of fraud resulting from secret commissions that its health-insurance company paid to a broker in return for delivering the district’s business.

South-Western schools has sued the insurer, United Healthcare of Ohio, and broker Joseph James & Associates of the Northwest Side of Columbus.

From 1996 to 2006, the district paid the brokerage more than $382,000 in fees to act as an independent consultant. But from 1999 to the present, United paid the brokerage more than $645,000, creating a conflict of interest, according to the lawsuit filed April 28 in Franklin County Common Pleas Court.

The district fired Joseph James & Associates on April 4. The brokerage’s president, Fritz Neuhart, didn’t return repeated telephone calls to his office yesterday.

His attorney, Kort Gatterdam, would not confirm or deny that United paid the money but said the lawsuit is "absolutely false" and "going nowhere." It was South-Western schools that chose to do busi- ness with United, not his client, Gatterdam said.

United Healthcare spokeswoman Debra Spano said the company doesn’t comment on lawsuits.

The payment plan is similar to one that United entered into with Columbus Public Schools’ former broker Grady Enterprises. Evidence in an Ohio Department of Insurance hearing showed that Grady received $517,000 from United over four years, while at the same time Columbus schools paid $137,000 to the company to guide its insurance purchases.

Earlier this year, the Department of Insurance entered into settlement agreements with United and Anthem over paying brokers in addition to the fees their clients had paid. However, the department said state law prevents it from making facts in the cases public, including who the victims were and how much money was involved.

United paid $175,000 in fines and administrative costs to end a department investigation; Anthem paid $30,000.

"This latest revelation about the second school district is a vivid example of why it is absolutely essential for the insurance regulator to issue a report describing the nature of the investigation, the findings of the investigation and the reasons for the settlement," said Birny Birnbaum, director of the Center for Economic Justice, a Texas-based group advocating for more consumer protections in insurance.

"There is absolutely no reason to believe that United did this with only two school districts. It seems like it’s a pattern of business to issue contingent commissions in order to compete for the business."

Insurance Department spokesman Robert Denhard would not say yesterday whether the agreement his agency entered into with United involved South-Western schools, but he said the department was "aware of the situation."

South-Western schools became suspicious when a Department of Insurance investigator contacted the district and asked questions about its insurance contracts, said Alan Starkoff, an attorney for the district.

"We pursued our own investigation," Starkoff said. "We sent letters and, ultimately, we received confirmation (from United) of the payments."

United took the position that the money it paid the broker did not come from the district but out of the company’s pocket, Starkoff said.

Among other claims, the lawsuit alleges that United committed fraud in what amounted to a conspiracy to ensure that the district would choose United "despite inferior coverage and (an) unfavorable premium structure."

When the district hired Joseph James & Associates in 1999, its premiums to cover about 2,450 employees totaled about $7 million. This year, they are expected to exceed $21 million, the lawsuit says.

The district is seeking damages of no less than $200,000 and an accounting of all profits derived from the money it paid to United Healthcare.


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