Judge freezes assets of allegedly fraudulent Bakersfield health plan operator ‘on the verge of collapse’
A temporary restraining order issued
The federal agency's lawsuit says the companies, operating as a single entity known as Riverstone, or
First registered in early 2014, Riverstone was ostensibly providing health coverage to 18,687 employees enrolled in 119 different medical plans. Those enrollees worked in a wide variety of industries in
The companies and four individual defendants -- company officials
Cooperating and assisting
Bugli, reached Thursday at the company's headquarters, said Riverstone agreed to the temporary restraining order with the intent of protecting members of its health plans.
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Bugli, a founding partner who served as Riverstone's chief operating officer, owns 47.5 percent of the company and had discretionary authority to pay subscribers' medical claims. Kelly, another founding partner who owns 47.5 percent, was the company's president and chief executive officer. Clarke, a 5-percent owner, worked with brokers to market Riverstone's services. Manqueros, who court records say lives in
Riverstone operated on two floors of an office tower at
Too little money
One of the lawsuit's key contentions is that Riverstone inappropriately commingled the various plans' accounts, such that premiums that were supposed to be paid into separate funds were lumped into a single account. When the company's aggressively low premium prices proved inadequate to cover medical claims, federal officials allege, the company had to decide which claims to pay and which to neglect.
The result was that many subscribers' credit scores suffered as their bills went into collection, according to the lawsuit. In some cases, medical care providers refused to treat some plan subscribers because of outstanding account balances.
The lawsuit says more than
Profit-and-loss statements referenced in the lawsuit indicate 34 of 81 employer customers of Riverstone were running a negative balance during the first three quarters of 2018.
"Based on the ever-growing backlog of unpaid claims, and the continual payment of excessive fees, (Riverstone) will not be able to pay all outstanding and future claims and is on the verge of collapse," the suit states.
Aggressive pricing
The company also failed to have its health plans' insurance risk rated and approved by an actuary, the lawsuit states. It says the company sometimes agreed to lock in low premium rates for several years, further reducing chances the company's financial reserves would be sufficient to pay subscribers' medical claims.
Compounding this risk, according to the lawsuit, was the company's practice of charging "exorbitant" management fees amounting to 20 percent of a premium. The suit says these fees were not disclosed until recently to employers participating in the health plans. Together with fees paid to brokers and others, these charges accounted for as much as 45 percent of premiums collected from participating employers.
Short on revenue from premiums, the company took out seven loans for a total of
The lawsuit asks the judge to force the defendants to restore customers' financial losses, reimburse all fees to the court-appointed receiver and disgorge any ill-gotten gains earned in connection with the alleged violations.
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