It's debatable if the fiduciary standard is 'higher' than suitability. But the better question might be, who's holding the bar?
June 20--Physicians United Plan didn't make headlines until last week. But records show the Medicare Advantage HMO provider -- the biggest of its kind in Marion County -- has been addressing administrative, legal and financial issues almost since its inception.
The state took receivership of the Orlando-based insurer earlier this month after determining that it was insolvent. The move sent some 38,000 members in 14 counties, including more than 6,200 people in Marion, scrambling to arrange new coverage.
Court records and documents from the state and federal governments show Physicians United, known as PUP for short, has been doing battle in multiple forums for the past seven years.
On the administrative front, the federal Centers for Medicare and Medicaid Services fined PUP $50,000 in December 2012 because of problems with the company's Medicare Advantage Prescription Drug Plan Contract No. H5696.
CMS alleged that PUP failed to comply with federal requirements "governing the processing of Part C grievances, organization determinations and appeals," an agency record shows.
Two years ago, in a federal lawsuit, PUP and other medical and medical-related companies were accused of Medicare fraud. The federal government declined to join as a plaintiff, but the action remains pending.
In May, the plaintiff removed PUP's owner, IDJB Investments LLC, as a defendant. But PUP itself is still being sued.
In a court filing earlier this year, PUP said it is a privately held company whose majority owner is IDJB.
According to the Medicare fraud lawsuit, Dr. Sandeep Bajaj owns IDJB. Documents on file with the state list Imtiaz H. Sattaur as PUP's chief executive.
Multiple efforts to reach Sattaur, Bajaj or anyone from PUP were unsuccessful.
Last year, a former PUP saleswoman targeted the company in a federal "whistleblower" lawsuit. Suzanne Rawlins alleges, among other things, that the company:
Illegally shut out potential policy holders who were blind because they were more likely to have or develop medical conditions that are expensive to treat;
Prevented her from selling in Pinellas County because some of her policy holders there saw a doctor who ordered too many tests;
Gave her a list of "preferred" doctors who had financial incentive based on medical loss ratio;
Eventually fired her for complaining.
PUP, through its attorney, has denied the charges. The lawsuit remains pending.
Earlier this year a former nurse care coordinator sued PUP alleging failure to pay overtime. The company has denied wrongdoing. That suit also remains pending.
In February 2005 the company incorporated in Florida. Five months later it was licensed as an HMO. It started business on Jan. 1, 2006, and by the end of that year had 894 enrollees in its Medicare Advantage HMO product, according to a report from the state Office of Insurance Regulation.
That number jumped to 3,205 by the end of 2007. The balance sheet, however, wasn't progressing as well.
At the end of 2007, PUP's capital and surplus registered at negative $316,642, the state report said. Florida required PUP to have $1.5 million in capital and surplus.
To comply with state rules, PUP issued additional private stock and a $1 million surplus note during the first quarter of 2008. In the third quarter of that year it issued additional surplus notes totaling $4.2 million, the state report shows.
The state was back two years later and once again found trouble in PUP's books. At the end of 2009, the company counted 18,574 enrollees but again had insufficient capital and surplus, the state reported.
State law only requires a financial examination every five years, and there were no reports after the 2009 version.
By the end of last year PUP had more than 38,000 enrollees. In retiree-rich Marion County it had become the biggest Medicare Advantage HMO, serving 6,200 of the nearly 21,000 residents who elected to choose such coverage.
State experts dove back into PUP's books in April. As in the past, PUP reported financial data indicating it was properly capitalized. And as in the past, the state differed.
Only this time, regulators uncovered accounting problems so significant that the state decided to step in once and for all.
At issue was a newly discovered sale/lease-back agreement between PUP and Pacific Western Equipment Finance, according to an affidavit from an official with the Office of Insurance Regulation.
The company's financial statement for March showed $33.9 million in cash, cash equivalents and short-term investments. However, $29.8 million of that was encumbered as part of the Pacific Western agreement, the affidavit said.
On April 16, the state said, PUP received default notices from Pacific Western in the amount of $28.9 million, "which is the aggregate amount of assets collaterized under the sale/lease-back arrangement," the affidavit said.
By the state's accounting, the $28.9 million in encumbered assets thus had to be considered "non-admitted," since the money couldn't be used to pay losses and claims.
There was similar trouble on the receivables part of the ledger. According to the state, $34.5 million of the $45.8 million PUP listed there was not admittable.
The result: Instead of standing at a capital and surplus of $14.5 million, as PUP represented to the state, it actually registered negative $48.9 million.
In light of this, on April 16 PUP pledged to seek a $30 million cash infusion by June 3.
On May 27, PUP filed its financial statement for April. It showed capital and surplus of negative $12.9 million.
The cash infusion never materialized. That's when the Office of Insurance Regulation notified the state's chief financial officer that grounds existed for initiation of receivership proceedings.
Contact Jim Ross at firstname.lastname@example.org or 671-6412. Follow him on Twitter @jimross96.
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