Regulators Seek to Close Simi Valley Health Plan

In March, 1991, Naomi Bader, a Simi Valley accountant, signed up for the Physicians Choice health plan because it offered more coverage, yet was less expensive than the insurance plan she had been using. She also saw herself as a good neighbor because Physicians Choice was based in Simi Valley.

Today, Bader, 36, believes that she made a bad decision. She contends that the company, which changed its name to Physicians Benefit Plan, has failed to pay her and her physician nearly $1,000 in medical claims stemming from an asthma condition that she developed last year.

She said company officials have repeatedly refused to return her calls. She said she has been told that the supervisors are in meetings or that they cannot help her because “the computers are down.”

“It’s been exasperating,” Bader said. “I feel like I’m punching my head against a brick wall.”

When she complained recently to the California Department of Insurance, she learned that state regulators have already gone to court in a bid to put Physicians Benefit Plan out of business.

On May 7, the department obtained a court order instructing the firm to stop selling coverage for 20 days. Today, Los Angeles Superior Court Judge Robert H. O’Brien is expected to rule on the state’s request for a preliminary injunction.

If approved, it would shut the company down until a trial can be held.

“Our contention is that they are illegally selling insurance,” state Deputy Atty. Gen. Susan Henrichsen said.

The complaint also alleges that Physicians Benefit Plan engaged in misleading advertising and violated an earlier cease-and-desist order.

In a written statement issued earlier this month, California Insurance Commissioner John Garamendi said, “I ordered Physicians Choice to stop doing business in January, so they moved to a storefront down the block, changed their name to Physicians Benefit and continued selling worthless insurance to unsuspecting victims.

“With the court’s help, we’re shutting them down again, hopefully for good.”

Bader has also contacted the Ventura County district attorney’s office regarding Physicians Benefit Plan. On Tuesday, Deputy Dist. Atty. Jeff Bennett, the prosecutor who handles insurance fraud cases, declined to comment on whether a criminal investigation has been initiated.

Lawyers for Physicians Benefit Plan have declined to comment on the state’s civil complaint. “We don’t want to discuss it or litigate it in the newspaper,” attorney Alvin B. Green said.

The company’s office at 970 Enchanted Way in a Simi Valley industrial park remained open on Tuesday. A receptionist said it was now occupied by Unified Benefit Plan. She said no one was available to answer questions concerning Physicians Benefit Plan.

According to court documents, the company affiliated with a labor union in January and granted membership to virtually anyone who wanted to purchase its health-benefit plan. The company has contended that it is now under the jurisdiction of the U.S. Department of Labor--and exempt from state insurance regulations.

State officials have alleged that the Simi Valley company paid 78% of its premiums to its agents as commissions. As a result, it might have insufficient funds to pay health claims, the regulators said.

Department of Insurance spokeswoman Elena Stern said her agency has stepped up enforcement this year against illegal insurers, particularly those offering group health plans to small businesses and individuals.

“Unfortunately, it’s a scam that is not uncommon,” Stern said.

Stern said anyone who wants to find out if their insurer is licensed can call the department’s toll-free hot line, 1-800-927-HELP.

Bader, the Simi Valley accountant, has terminated her policy. She is planning to take Physicians Benefit Plan to small claims court and is shopping for new medical coverage.

But Bader is concerned that her next insurer will not cover her pre-existing condition--asthma--for several years. She believes she might have to pay thousands of dollars for prescriptions and physicians’ care for the ailment.

“You read about this, you hear about this all the time,” Bader said. “You think it’s never going to happen to you. I’m here to tell you it does.”