Ohio Woman Sentenced To Prison For Theft From Health-Benefit Program

CLEVELAND, April 9 -- The U.S. Attorney for the Northern District of Ohio issued the following news release:

A Youngstown woman was sentenced to 3 1/2 years in prison and ordered to pay nearly $55,000 in restitution for using false identities to defraud health benefit plans , United States Attorney Steven M. Dettelbach said.

Shari Spencer, 42, previously pleaded guilty to three counts: theft from a health-benefit program, aggravated identity theft and making false statements.

The following description of Spencer's crimes come from court documents:

Professional Benefits Administrators ("PBA") was a third-party administrator of health care benefit plans. PBA's main office was located in Cuyahoga Falls, Ohio, and it had a branch office in Austintown, Ohio. The defendant, SHARI L. SPENCER ("SPENCER"), was employed by PBA in various capacities from 2000 until she left in September 2010, when PBA went into receivership.

Spencer was the office manager of PBA's Austintown office from 2008.

PBA had a number of clients with whom it contracted to provide third-party administration services in relation to the health care benefit plans that the clients sponsored for their employees. Those clients included Northern Ohio Medical Specialists ("NOMS") and Community Health Care, Inc. ("CHC").

NOMS

NOMS was the sponsor of the Northern Ohio Medical Specialists Employee Health Benefit Plan - HSA Plan, a self-funded health care benefit plan for the benefit of NOMS' employees (the "NOMS Health Benefit Plan"). PBA was the third-party adminstrator for the NOMS Health Benefit Plan. PBA was responsible for processing and adjudicating the health benefit claims of NOMS employees and for paying those claims from a bank account at Village Bank (Blain, MN), which PBA held in trust for NOMS ("NOMS Health Benefit Plan Trust Account").

NOMS also contracted with an insurance carrier, TPAC, to provide "stop-loss" insurance coverage in relation to the NOMS Health Benefit Plan. Under the agreement, NOMS paid the health benefit claims of NOMS employees up to a certain, agreed-upon aggregated amount for all employees. If the combined health benefit claims of NOMS employees exceeded that amount, the stop-loss coverage kicked in, and TPAC was responsible for paying the excess NOMS employee health benefit claims.

To facilitate the collection and making of such stop-loss payments, PBA submitted claims in excess of NOMS' aggregate claims amount to TPAC. TPAC, in turn, set up an account at Village Bank such that anytime claims exceeded NOMS's share, TPAC's account automatically deposited funds in the amount of the required stop-loss payment into the NOMS Health Benefit Plan Trust Account. (As a technical matter, the TPAC account was similar to an overdraft protection account for the NOMS Health Benefit Plan Trust Account.) PBA then prepared checks drawn on the NOMS Health Benefit Plan Trust Account and sent them to the provider in question to pay the claim.

SPENCER had access to the names, addresses, social security numbers, employee numbers, and other personal identification information of NOMS employees, and to other NOMS Health Benefit Plan information. SPENCER also had access to the PBA claims system and to information relating to the NOMS Health Benefit Plan Trust Account.

CHC

PBA was also the third-party administrator services in relation to the self-funded health benefits plan that CHC sponsored for its employees.

Like NOMS, CHC also contracted with an insurance carrier to provide stop-loss insurance coverage for the health benefit claims of CHC employees, but CHC used Trustmark, not TPAC. Under the agreement, CHC paid the health benefit claims of its employees up to a certain agreed-upon amount. If the health benefit claims of CHC employees exceeded that amount, the stop-loss coverage kicked in, and Trustmark was responsible for paying the excess health benefit claims of CHC employees, which it did by making stop-loss payments directly to CHC.

To get stop-loss coverage, CHC was required to provide certain information to Trustmark about its employees and their prior health claims and claims history ("disclosure information"). Trustmark based the premium it charged to CHC for the stop-loss coverage on this disclosure information, and the enforceability of the stop-loss coverage was subject to proper disclosures being made to Trustmark. PBA was responsible for compiling and providing any and all disclosure information relating to CHC employees to Trustmark such that the stop-loss coverage would be in force and cover any excess claims. SHARI L. SPENCER was the sole person responsible for handling this disclosure information for CHC and transmitting it to Trustmark.

The Scheme

Using personal identification information for NOMS employees and/or their covered spouses, Spencer manufactured and submitted two separate fake medical claims for stop-loss payments to TPAC, purportedly on behalf of NOMS. Based on Spencer's submissions, TPAC paid the claims and funded the NOMS Health Benefit Plan Trust Account even though no medical services were ever rendered in either case. Spencer then diverted the funds from the NOMS Health Benefit Plan Trust Account to other uses.

In the first instance, Spencer diverted $54,809.38 to CHC to cover up Spencer's failure to provide the proper disclosure information to Trustmark (CHC's stop-loss carrier), which failure had resulted in Trustmark denying a $54,809.38 claim for a CHC employee. In the second instance, Spencer caused a check in the amount of $21,014.83 to be issued to "S.L. SPENCER HSPT," which she signed and deposited into her own bank account.

This case was prosecuted by Assistant U.S. Attorneys Rebecca Lutzko and John Siegel following an investigation by the Department of Labor, Employee Benefits Security Administration and Office of Inspector General.

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