Dozens of Colorado school districts, town governments and private companies have come forward with accusations against Rural Health Plans Initiative, and two have filed suit for fraud and negligence.
Among hundreds of employees of those victimized groups, some individuals are stuck with massive claims left unpaid by Rural Health Plans.
Nancy Warman holds hospital bills for more than $45,000 and is told she is liable. Her employer, a small home-health-care firm in Englewood, used Rural Health Plans to administer health insurance and is now in Chapter 11 bankruptcy itself, after learning of $480,000 in unpaid claims.
Warman’s boss, Anna Zarlengo, said 115 employees at Best Care are now with Kaiser Permanente for their health insurance. Zarlengo is told she owes $80,000 for her own knee replacement that Rural Health Plans never paid for, and some of her employees are filing for personal bankruptcy.
Victims and their lawyers are being told by regulators that the Centennial-based company falls through legal cracks because each plan was allegedly “self-funded” instead of regular pooled insurance. Colorado’s Division of Insurance says it does not have jurisdiction, and the regional U.S. Department of Labor office overseeing such self-funded plans says it is not sure of any recourse.
“Not really insurance”
The Division of Insurance is working with the state attorney general’s office to register complaints and pursue potential fraud in the case.
“I feel terrible folks are subjected to people who play this kind of a shell game,” said Insurance Commissioner Marcy Morrison. “We will do everything we can at our end to take complaints, answer questions, but it is not really insurance, what (RHPI) was doing.”
Some employers set up the self-funded plans, under a federal law called the Employee Retirement Income Security Act, that allows them to avoid more expensive mandates for minimum coverages under state insurance laws.
Rural Health Plans Initiative, referred to as RHPI, told clients in recent letters that it was filing for bankruptcy and had no money to pay claims.
Boulder attorney David Olson said he has heard from “approaching 40” schools, towns, businesses and nonprofits that used RHPI, and the list is “growing by the day.”
Olson filed suit in late October on behalf of Genoa-Hugo School District on the Eastern Plains, and a consortium called East Central Board of Cooperative Educational Services (BOCES) that serves rural districts.
RHPI founder Gerry Rising Jr., named in the suit, did not hold each client’s payments in trust, wildly miscalculated expected claims, and doesn’t appear to have the backup or “stop-loss” insurance required by contracts, Olson said.
“He’s negatively affected a lot of people,” Olson said.
Olson said he has talked with potential victims, including the city of Gunnison; school districts in Yuma, Woodlin, South Conejos, Liberty, Burlington and elsewhere; and a private employer with 180 employees. Some are now scrambling to find insurance through other brokers, though they may find coverage gaps until Jan. 1 — to be covered by Dec. 1, for example, small groups may have needed to submit applications by Nov. 15.
“We had what we thought was insurance in good faith,” said Warman, who is not sure personal bankruptcy will help after rule changes made it harder to cancel bills. “We made our premiums and our co-payments in good faith. To be penalized for other people’s manipulations of the law isn’t fair.”
Rising did not return phone calls for comment Friday. On Thursday, he said he was trying to help clients find new health care, before hanging up.
Searching for solutions
Nearly all the groups Olson has heard from had at least one major, expensive claim outstanding for an employee who needed care, he said.
Margo Wilkinson, the former city clerk of Burlington, near the Kansas border, said she has a $17,600 bill from a medical flight after a heart attack. She hopes Burlington will cover the bill; the town administrator said Thursday that the town of 4,400 may need to rewrite its $9 million annual budget to cover $285,000 in claims unpaid by RHPI.
“What am I going to do with a $17,000 bill? Good grief,” Wilkinson said. The victims are in a “doughnut hole” devoid of regulations, she said.
The 50-employee East Central BOCES is not yet sure how to pay $113,000 in claims left unpaid by RHPI, or who exactly is “left holding that bag,” said executive director Floyd Beard. “We thought we had good insurance, and we’ll stand behind our people; but boy, it’s going to create quite a problem trying to figure out how to pay when we had basically already paid for this once,” Beard said.
“It’s really a mess.”
Michael Booth: 303-954-1686 or mbooth@denverpost.com
