Insurance fraud task force appointed
Staff announcements
Managed care reform and patient rights
act
Doing business with the Illinois FAIR
Plan Association
Illinois CHIP marks ten year anniversary
Exam reports filed
Producer regulatory action
Hearings
Company action
A new task force charged with examining the scope of the insurance fraud problem in Illinois has been named by Governor George H. Ryan and Director Nat Shapo. The Insurance Fraud Task Force, established with the passage of Senate Bill 359, sponsored by State Senator Patrick O'Malley of Palos Park, is made up of insurance regulators; insurance industry leaders; federal, state and local law enforcement officials; and consumer representatives.
Insurance fraud, whether committed by sophisticated criminals or dishonest consumers, is costing Illinoisans an estimated 4.5 billion dollars every year. "Through this task force consumers, legislators, insurers, law enforcement and regulators will begin to work together to address the problem," Governor Ryan said.
"Nationally, insurance fraud cost estimates range from 85 to 120 billion dollars yearly," noted Director Shapo. "Insurance fraud occurs during the process of buying, using, selling, or underwriting insurance and is often classified as being either hard or soft," he said.
Hard fraud is a deliberate attempt to either stage or invent an accident, injury, theft, fire or other type of loss that would be covered under an insurance policy. Sophisticated conspiracies involving doctors, lawyers and their patients/clients are widespread and one of the most costly forms of insurance fraud. A single crime ring can cost the system millions of dollars a year.
Soft fraud, which is also called opportunity fraud, occurs when a policyholder or claimant exaggerates a claim based upon a legitimate accident or event. One example is a car owner involved in a "fender bender" who inflates the claim to cover the policy deductible or the cost of the insurance premium. Another example is a claimant who exaggerates the amount or value of items stolen from a home or business.
Issues to be examined by the Insurance Fraud Task Force include:
The Insurance Fraud Task Force will report its findings and recommendations to Governor Ryan and the Illinois General Assembly no later than July 1, 2000.
Director Shapo has named Robert Heisler as the new Deputy Director of the Consumer Market Division and Pamela Donnewald as Assistant Deputy Director of the Property/Casualty Compliance Section.
Bob began his career with the Department as a Field Rate Examiner in August of 1970 and has subsequently served in a number of supervisory positions, including Chief Examiner of the Property and Casualty Market Conduct Examination Unit, Technical Supervisor of the Consumer Services Section, and Assistant Deputy Director of the Property and Casualty Compliance Section. He has also headed the Producer and the Cost Containment Sections on an acting basis. Bob is a Certified Insurance Examiner and a charter member of the Insurance Regulatory Examiners Society (IRES).
Pam joined the Department in 1985 as a Governmental Career Trainee. She has obtained an extensive background in property and casualty insurance as an insurance analyst in the Corporate Regulation, Compliance, and Consumer Services Sections. For the past four years, she has served as Special Assistant to the Consumer Market Deputy Director. Pam is a Chartered Property Casualty Underwriter (CPCU) and a Certified Insurance Examiner. She is an executive officer of the Land of Lincoln CPCU Chapter and serves on the IRES Board of Directors.
Larry Gorski, the Illinois Department's Life Actuary, has been elected to the American Academy of Actuaries Board of Directors for a three year term beginning in January.
Managed care reform and patient rights act
by William McAndrew, Assistant Deputy Director, Life A&H Compliance
With the passage of Senate Bill 251 (PA 91-617), managed care in Illinois may look significantly different beginning January 1, 2000, when the Managed Care Reform and Patient Rights Act becomes effective. With this in mind, the Illinois Department of Insurance, in conjunction with the Illinois Department of Public Health, has moved forward rapidly to establish emergency rules to guide the managed care industry in complying with the new law.
Our overriding reason for proposing emergency rules has been the need of managed care entities to provide employers and enrollees a firm basis on which to make health care decisions. In 1998, there were approximately 2.4 million HMO enrollees in Illinois, more than 99% of whom were covered under group policies provided to them by their employers. The majority of HMO employer group policies will be up for renewal on January 1, 2000, and need to be renegotiated in the fourth quarter of 1999. In order to appropriately price and market their plans and adjust their working procedures to accommodate the new law's requirements, health care plans need to know exactly how to interpret Public Act 91-617.
Establishing emergency rules prior to the January 1 date, gives health care plans approximately three months to make the necessary transition to the new law and reduces the potential for confusion and disruption in the health care marketplace. More importantly, it gives consumers the comparison information essential for them to make decisions about their personal and family health care needs.
Soon after the Managed Care Reform and Patient Rights Act was enacted, the Department circulated a draft rule and held numerous follow-up meetings with all parties affected by the law (the insurance industry, the HMO industry, business groups, physicians' representatives and consumer groups) to set up clear guidelines for regulation of the managed care industry. The rule that resulted includes requirements relating to: the provision of information to enrollees required by managed care entities; notice to enrollees and physicians relating to the nonrenewal or termination of physician contracts; the disclosure of an enrollee's right to transition of services when changing plans; a requirement that managed care entities file their external grievance review plans with the Department; the formal establishment of a dispute resolution process which clearly defines the roles of the Department of Public Health and the Department of Insurance in complaint resolutions and quality of care issues; the structure for managed care entities to report complaints to the Department on an annual basis; the rights of enrollees when accessing specialist providers not in their network; the provision of emergency services and enrollees' rights to access such services under a prudent lay person definition; and guidelines for establishing approval for post-stabilization services.
The Illinois FAIR Plan Association is a not-for-profit property insurance association supported by nearly 500 Illinois insurance companies. It was formed in 1968 to provide basic and affordable property insurance to applicants in urban areas in Illinois who were unable to obtain insurance through the standard market, for reasons beyond their control. FAIR is an acronym for Fair Access to Insurance Requirements.
The FAIR Plan, as the market of last resort, currently offers dwelling fire, commercial fire and a wide range of homeowners coverage on a statewide basis -- a substantial expansion from the basic property insurance originally offered only in designated urban areas. At one time, the Illinois FAIR Plan was one of the largest insurers in the state. Today, the FAIR Plan writes only a small percentage of the state's policies. However, it continues to be a viable alternative for selected property owners.
In order to qualify for the FAIR Plan, the applicant or producer must attempt to obtain coverage from three other companies. In addition, the property must be well maintained and meet reasonable underwriting requirements.
Immediate binding is available under the owner occupied dwelling fire or homeowners programs, by providing a completed application, Statement of Attempts form, a recent exterior photo, and the proper premium. If eligibility requirements are met, coverage will go into effect at 12:01 AM the day following receipt of those items by the FAIR Plan. If additional information is needed, the FAIR Plan will telephone the producer.
A quotation may also be requested by submitting an application and a Statement of Attempts Form. Binder coverage can be requested in the event the FAIR Plan has not made an offer to insure the property within 21 calendar days of receipt of a completed application.
All properties are inspected to confirm that reasonable underwriting requirements are met. The FAIR Plan looks for hazardous conditions under the applicant's control, such as heating, wiring and housekeeping hazards. If unsatisfactory conditions are found, the applicant is given an opportunity to make corrections.
Over the past several months, in response to industry feedback, the FAIR Plan has instituted a number of changes to simplify the process of doing business. Producers are encouraged to assist their customers in shopping around for the best program available.
Anyone needing additional information about the FAIR Plan, should contact Doug Jensen, General Manager, Illinois FAIR Plan Association at PO Box 81469, Chicago, IL 60681-0469. The FAIR Plan can also be reached by telephone at 312/861-0385 or by fax at 312/861-0134.
(CHIP is a state health benefits program subject to its own enabling law and governed by a Board of Directors, chaired by the Director of Insurance or his designee.)
In 1999, the Comprehensive Health Insurance Plan (CHIP) celebrated its 10th anniversary of providing much needed health insurance coverage to uninsurable Illinois residents. CHIP is one of Illinois' real success stories. Without CHIP, devastating medical expenses would be cost-shifted, making both medical care and health insurance more expensive and causing more people to become uninsured. The traditional program enables individuals with serious medical conditions to purchase health insurance and secure needed medical treatment, while HIPAA-CHIP allows Illinois residents to change jobs without worrying about the impact on their health insurance.
Since the program became operational in May 1989, the traditional CHIP program has insured more than 18,000 people and paid over $340 million in benefits. Fourteen percent of the 4,514 persons who first enrolled in CHIP are still covered by that plan which currently numbers 5,129. Enrollment in the newer HIPAA-CHIP program has also continued to grow since its inception on July 1, 1997, with 2,636 federally eligible Illinois residents presently participating in that program.
While growth in enrollment is an important measure of CHIP's success over the past decade, so too is the expansion of its mission. Illinois CHIP is now considered one of the leading health benefits risk pools in the country, as evidenced by the national recognition it has received.
In June, the U.S. House Commerce Subcommittee on Health and Environment invited Executive Director Richard W. Carlson to testify before a special hearing on "Access to Affordable Health Coverage for the Uninsured." His testimony focused on how Illinois has used its successful state health benefits risk pool (CHIP) to comply with the individual access requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
"While other states have reported serious disruptions and large premium increases resulting from guaranteed issue in their individual health insurance markets, Illinois has not experienced any such problems," Carlson noted. "By using a broad-based assessment, Illinois has been able to spread the cost of insurance for these high-risk individuals across the entire health insurance industry and our individual health insurance market has not been forced to fully absorb and subsidize these costs."
Several reports issued in the past year have also spotlighted Illinois CHIP. In May, the General Accounting Office (GAO) issued a report to the Chairman of the U.S. Senate Committee on Health, Education, Labor and Pensions, entitled "Private Health Insurance: Progress and Challenges in Implementing 1996 Federal Standards." The report detailed the results of a GAO survey of the premiums that 41 individual health insurance carriers in 14 guaranteed issue states would charge a HIPAA eligible individual with a specified health condition. It also included a summary of the premiums that same individual would pay in each of the 22 states, including Illinois, that use their state high risk pools as an alternate mechanism for complying with this federal requirement.
The GAO found that all but three (3) of the 41 carriers surveyed would charge an eligible individual with a specified health condition a higher than standard rate in the guaranteed issue states, and nearly half of those would charge 300 to 464 percent of the standard rate. In contrast, in the 22 states, including Illinois, that use a high-risk pool, premiums for this same individual would be limited to 200 percent or less of the standard rate.
The GAO report also addressed the need for better consumer education about HIPAA, and how federal, state and other efforts that target HIPAA-eligibles are under way. Illinois was the only state specifically identified that "uses their high-risk pool as an alternative mechanism" and "has undertaken educational efforts to inform the public about the availability of coverage through the pool."
Another report on state-chartered Health Insurance Plans (HIPS) issued on August 27, 1999, by The Heartland Institute, a Chicago-based think tank, reached the same conclusion. "While other states are struggling with the negative consequences of federal fallback provisions that disrupt the individual and small-group insurance markets, Illinois legislators were able to develop a successful health insurance plan," wrote Conrad Meier, health policy analyst for Heartland and author of the study. He also outlined five key "Steps for Creating a Successful HIPS," and referred to Illinois CHIP as "one of the most successful and efficiently run HIPS in the nation."
A third report on states' use of their high risk pools for complying with HIPAA's individual market requirements was recently completed by Len Nichols and Linda Blumberg of the Urban Institute in Washington, DC. They studied the premiums being charged for individual health insurance policies in a number of states, including those that had implemented the federal guarantee issue requirements and those that had high risk pools in place. The study showed that premiums for individual policies in states using risk pools for HIPAA compliance were well below those being charged for similar coverage in states that were not using risk pools.
The creation of CHIP has meant a "freedom from fear" for many Illinois residents. With the implementation of the new HIPAA-CHIP, the program is now more than ever allowing our citizens to lead productive lives without the financial threats that a sudden medical crisis can cause.
Further information about coverage, rates and application procedures can be obtained from: the Illinois Comprehensive Health Insurance Plan, 400 West Monroe Street, Suite 202, Springfield, IL 62702-1823; 1-800-962-8384; http://www.chip.state.il.us/chip.htm.
Financial
Agora Syndicate, Inc. -- 9/28/99
Associated Physicians Insurance Company -- 10/22/99
Independent Farmers Mutual Insurance Company -- 11/05/99
Mason County Mutual Insurance Company -- 11/05/99
North Palmyra Farmers Mutual Fire Insurance Company -- 11/05/99
RightCHOICE Insurance Company -- 10/14/99
Sigel Mutual Insurance Company -- 11/05/99
Standard Mutual Insurance Company -- 10/21/99
Township Mutual Insurance Company of Sparta -- 11/05/99
Virginia Surety Company, Inc. 9/28/99
Market Conduct
Allianz Life Insurance Company -- 10/15/99
Amex Assurance Company -- 9/17/99
American Health Care Providers, Inc. -- 9/28/99
American Heartland Insurance Company -- 9/23/99
American Travellers Life Insurance Company -- 9/17/99
Chicago Motor Club Insurance Company -- 10/20/99
Federated Mutual Insurance Company -- 10/19/99
Hanover Insurance Company, MA -- 9/17/99
Hartford Life Insurance Company -- 10/14/99
Illinois Healthcare Insurance Company -- 9/28/99
Massachusetts Life Insurance Company -- 10/20/99
Monumental Life Insurance Company -- 10/26/99
Old Republic Life Insurance Company -- 11/04/99
Progressive Casualty Insurance Company -- 10/19/99
Reliable Life Insurance Company -- 10/20/99
United Equitable Insurance Company -- 9/23/99
Worldwide Direct Auto Insurance Company -- 9/16/99
(Copies of regulatory orders are available upon written request to the Producer Regulatory Unit, for $1/page. The number of pages are indicated in parentheses following the effective date.)
Stipulation and Consent Order - Civil Forfeiture Paid
Allsafe Insurance Agency, Inc.
5021 West Cermak Road
Cicero, IL 60804
Effective 9/29/99 (4)
Gary Gandy
4043 Indian Hill Drive
Country Club Hills, IL 60478
Effective 9/14/99 (3)
Michael S. Gavin
5274 Pepper Drive
Rockford, IL 61114
Effective 9/17/99 (3)
John H. Jordan
8051 Honore 3N
Chicago, IL 60620
Effective 8/30/99 (4)
Kamberos Associated Insurance Agency
4016 South California
Chicago, IL 60632
Effective 8/26/99 (5)
Keith G. Kamberos
4016 South California
Chicago, IL 60632
Effective 8/26/99 (5)
Ray E. Knickman III
876 West State Street
Jacksonville, IL 62650
Effective 9/24/99 (4)
KRW Insurance Agency
338 Memorial Drive
Crystal Lake, IL 60014
Effective 9/16/99 (5)
Alan H. Lasarre
2007 Pringle Drive
Marengo, IL 60152
Effective 9/16/99 (5)
Life Underwriters Training Council
7625 Wisconsin Avenue
Bethesda, MD 20814
Effective 8/23/99 (3)
Lumbermens Life Agency, Inc.
One Kemper Drive F-3
Long Grove, IL 60049
Effective 9/23/99 (3)
Midwest Integrity Underwriters Agency, Inc.
605 West State Street
Jacksonville, IL 62650
Effective 8/26/99 (4)
Patrick O. Morehead
1394 Fountain Green
Crystal Lake, IL 60014
Effective 9/16/99 (5)
Phillip L. Morehead
60 Indian Hill Trail
Crystal Lake, IL 60012
Effective 9/16/99 (5)
Mark G. Nelson
405 West Wilshire
Palatine, IL 60067
Effective 9/23/99 (3)
Ronald Newman
233 Donald Terrace
Glenview, IL 60025
Effective 9/29/99 (4)
E.H. Schroder Insurance Agency, Inc.
3424 18th Avenue
Rock Island, IL 61201
Effective 9/10/99 (5)
Kenton Schroder
613 East Laurel
Davenport, IA 52803
Effective 9/10/99 (5)
Kermit Schroder
3305 33rd Avenue Court
Rock Island, IL 61201
Effective 9/10/99 (5)
Steven Schroder
3301 26th Avenue
Rock Island, IL 61201
Effective 9/10/99 (5)
Marvin D. Spatz
2751 Karen Lane
Glenview, IL 60025
Effective 9/29/99 (4)
Denial of Request for License
Larry D. Hayes
621 Plymouth Apt. 208
Chicago, IL 60605
Effective 9/13/99 (2)
Wayne K. Newman
401 Pleasant Street
Utica, NY 13501
Effective 10/21/99 (2)
Jacques Wallace
5065 West Monroe Street
Chicago, IL 60644
Effective 9/13/99 (1)
Revocation of License
Allrisk International Ins. Agency, Inc.
138 North Schuyler
Kankakee, IL 60901
Effective 9/2/99 (5)
Jon R. Burns
1701 Woodcrest Drive
St. Anne, IL 60964
Effective 9/2/99 (5)
Curt S. Christie
1204 Whispering Hills Ct.
Naperville, IL 60504
Effective 9/13/99 (2)
Robert Orwig Insurance Agency, Inc.
409 Locust Street
Delavan, IL 61734
Effective 10/8/99 (8)
Order of Suspension
Michael T. Foy
1127 West Farwell Avenue #310
Chicago, IL 60626
Effective 9/7/99 (2)
Ronald W. Head
405 North Main Street
Benton, IL 62812-1265
Effective 9/24/99 (2)
Order of Suspension Lifted
Joseph Raymond Bayer, Sr.
PO Box 402
Alton, IL 62002
Effective 9/20/99
Scheduled Hearings:
Earl T. Hawkins
11/16/99 Hearing No. 3749
Denial of request for license
Jack Cassatt
State Farm Fire & Casualty Ins. Co.
11/16/99 Hearing No. 3748
Nonrenewal
Richard E. Jones Agency, Inc.
11/30/99 Hearing No. 3751
Revocation of registration
Patrick Houren
USAA Casualty Company
12/7/99 Hearing No. 3750
Cancellation
Clatis McGuire Jr.
Country Mutual Ins. Co.
12/8/99 Hearing No. 3752
Cancellation
Thomas R. Koonce
12/9/99 Hearing No. 3744
Revocation of licensing authority
Matters Settled without Hearing:
Jolie Holley
Allstate Insurance Company
Hearing No. 3741
Hearing dismissed 9/20/99
Illinois Life and Health Insurance Guaranty
Association
BW/IP International
Hearing No. 3511
Hearing dismissed 11/2/99
Real Estate Institute
Hearing No. 3742
Hearing dismissed 11/2/99
Allie Mae Wilson
State Farm Fire & Casualty Ins. Co.
Hearing No. 3745
Hearing dismissed 10/21/99
Completed Hearings:
James H. Bennett, Jr.
Hearing No. 3652
Order of revocation rescinded
Civil penalty 10/25/99
Charlene Hackler
State Farm Fire & Casualty Ins. Co.
Hearing No. 3739
Cancellation effective 9/20/99
Robert J. Jennings
Interstate Administrative Services
Hearing No. 3713
Cease & Desist Order made permanent 11/5/99
All proposals must be submitted to Department for approval
Margaret Kopecki
Hearing No. 3722
Order of suspension rescinded 9/23/99
Mutual Trust Life Ins. Co.
Hearing No. 3731
Plan for mutual holding company conversion
approved with conditions 9/30/99
Razak Sulaiman
Illinois Farmers Insurance Co.
Hearing No. 3736
Nonrenewal effective 9/20/99
Trustmark Insurance Company
Hearing No. 3732
Plan for mutual holding company conversion
approved with conditions 10/19/99
The American Home Life Insurance Company, KS, 11/16/99
The Bar Plan Surety and Fidelity Company, MO, 11/24/99
First Rehabilitation Life Insurance Company of America, NY, 11/16/99
Halcyon Insurance Company, OH, 11/16/99
Sheffield Insurance Corporation, IL, 11/30/99
Young America Insurance Company, TX, 11/24/99
Market Conduct Fines
The following entities were issued Stipulation and Consent Orders and fined for Insurance Code violations and/or improper claims practices cited in their Illinois market conduct examinations:
Allianz Life Insurance Company, MN, 10/14/99, $100,000
American Health Care Providers, Inc., IL, 9/28/99, $100,000
American Heartland Insurance Company, IL, 9/23/99, $10,000
American Travellers Life Insurance Company, IN, 9/17/99, $10,000
Hanover Insurance Company, MA, 9/17/99, $15,000
Hartford Life Insurance Company, CT, 10/19/99, $2,500
Illinois Healthcare Insurance Company, IL, 9/28/99, $10,000
Monumental Life Insurance Company, MD, 10/26/99, $40,000
Old Republic Life Insurance Company, IL, 11/04/99, $10,000
United Equitable Insurance Company, IL, 9/23/99, $15,000
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