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Health alliance:
State is on
witch hunt

Hawaii's insurance chief vows
to revoke the agent's licenses

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By Ian Lind
Star-Bulletin

The president of the Hawaii Healthcare Alliance accused state Insurance Commissioner Wayne Metcalf of engaging in "a continuing witch hunt" against the alliance and its efforts to bring cheaper coverage to thousands of residents not covered by Hawaii's Prepaid Health Care Act.

But Darren Larson said yesterday by telephone from his Texas home that he would comply with a cease-and-desist order served on him this week that demands that he stop marketing an alternative health plan, SAI Plus, to former HHA members.

The plan was sold to members as replacement coverage after regulators seized the company's offices and assets at the end of October, after determining that HHA was operating as an unlicensed insurer.

Larson said "about 40 percent" of former alliance members in Hawaii had signed up for the SAI plan.

HHA was covering about 3,000 people when it was shut down.

Metcalf announced yesterday he has also initiated proceedings to revoke Larson's general agent and subagent licenses to do insurance business in Hawaii, and is seeking 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 Healthcare Alliance is $200,000 in the red and new claims continue to be filed," Metcalf said in a press release.

Metcalf, who was traveling out of state, declined further comment, referring to a gag order covering ongoing court proceedings stemming from the shutdown of the alliance.

Larson's attorney, David Gierlach, said Metcalf's allegations "are inaccurate or incomplete, and we are confident that when given our opportunity in court, we will prevail."

"Darren Larson came into town and offered very good insurance policies that made health insurance affordable for self-employed people," Gierlach said. "They paid claims as they came in, and were absolutely up front with state agencies about the nature of the business.

"It's unfortunate the state is taking these kinds of actions without having what I believe are all of the facts."

Metcalf described the SAI Plus health plan as an "unauthorized" insurance product which is under investigation by the U.S. Department of Labor, the FBI, the U.S. Postal Inspection Service, and the Texas Department of Insurance.

Texas regulators charged earlier this week that SAI sold bogus health coverage to employees of seven school districts and acted as a third party administrator for other school systems, although it lacked a license to operate in the state.

SAI collected between $8 million and $10 million in premiums, but never obtained valid insurance coverage to back up the plans it sold, Texas regulators charged. They are seeking a $1 million fine and reimbursement to consumers for medical bills left unpaid.

In a separate action, Labor Department investigators seized business records from SAI's offices in Rockville, Md., and from homes of several company officials.

Ron Snyder, a Utah-based attorney and insurance consultant advising Larson, said he understood the Labor Dept. is investigating "complaints about claims not being paid and allegations of funds being missing."

"I'm not overly concerned," Larson said. "I'm sure that SAI was bonded."

Larson accused Metcalf of overreacting. "They (Department of Labor) are in the process of auditing them, and they did take a bunch of files," Larson said. "But it has nothing to do with the type of plan we offered."

"Those are just things that happen with (insurance) plans," Larson said. "You can't make 100 percent of the people happy."

Larson said a Jan. 4, 2001, hearing on the state's latest cease and desist order has been scheduled, but is likely to be postponed.