Medova Healthcare, which sold illegal insurance plans through chambers of commerce, has agreed to stop selling in Washington, according to the Office of the Insurance Commissioner.
The company also agreed to a $310,000 suspended fine, according to the OIC. It operated in 38 states including Washington and served 35,000 employees nationwide.
Medova sold health insurance plans to almost 140 small businesses in the state, covering 1,487 employees, through chambers of commerce. One of them mentioned in the OIC investigation was the Lakewood Chamber of Commerce. The chamber did not respond to inquiries.
“I know that many businesses want to offer the best benefits they can for the employees at a reasonable price,” Insurance Commissioner Mike Kreidler said in a statement. “I feel for those employers who bought plans from Medova and are facing expenses they didn’t expect.”
The health plans were marketed to small businesses as traditional insurance plans, but they were self-funded Employment Retirement Income Security Act health benefit plans. Under an ERISA plan, the employer is responsible for paying for its employees’ claims and the insurer that sold the coverage only administers the plan. ERISA plans are regulated by the U.S. Department of Labor instead of Washington state.
The OIC also said Medova collected premiums from small businesses and that “instead of keeping each employer’s premium and paying their claims individually, it pooled the money and doled out claim payments for each employer group from that source of money.”
As a result, some claim payments were delayed. Under an ERISA plan, the employer is financially liable for unpaid claims.
In 2020, the Department of Labor filed a complaint against the Kansas-based company alleging it misused funds from a multiple employer welfare arrangement that caused a deficiency on its Lifestyles Health Plan — the same plan Medova was ordered to stop selling in Washington.
In April 2021, the Department of Labor appointed an independent organization to oversee and manage employee health benefits and plans administered by Medova.
Kreidler encouraged employers that see an insurance plan they don’t fully understand to contact his office before they buy.
“Taking that extra step can prevent losses later on,” he said. “We can tell you if it’s legitimate.”