NU Online News Service, July 30, 2003, 11:55 a.m. EDT – Texas Insurance Commissioner Jose Montemayor has imposed stiff fines on what he says is a fraudulent health plan, according to the Texas Department of Insurance.

Montemayor also has fined some of the agents who sold the plan’s coverage in Texas, and he has ordered the agents to pay the victims’ unpaid health claims.

William R. Kokott and Nicholas E. Angelos, both of Carson City, Nev., organized the plan, Employers Mutual L.L.C., and they also organized an association, which was first known as American Benefit Society and later as Association Benefit Society, to market the plan, the Texas department says.

The association paid agents sales commissions in the range of 30% to 40%, the Texas department says.

Employers Mutual piled up $50 million in unpaid claims throughout the United States before regulators shut it down, officials say.

When Texas regulators ordered Employers Mutual to stop selling coverage in their state in October 2001, the plan had 7,200 members in Texas and had saddled one Texas resident with a $70,000 unpaid claim, officials say.

Texas regulators have issued a new order that finds that Kokott and Angelos were the sole managers and officers of Employers Mutual.

The order also finds that Kokott, Angelos and the benefit society association misrepresented Employers Mutual as a legitimate insurance plan and engaged in the business of insurance in Texas without the licenses required by state law.

The department order imposes fines of $5 million apiece on Kokott and Angelos and a $2.5 million fine on the benefit society association.

Kokott, Angelos and the association have 20 days to request a rehearing, the Texas department says.

The department notes that it has fined more than 30 agents who sold Employers Mutual coverage in Texas, revoked the insurance licenses of many of the agents and ordered the agents to pay the customers’ unpaid claims.

Additional agent cases are pending, the department says.