Insurance rip off angers lawmakers

Larry Henry

Friday, Sept. 19, 1997 | 10:04 a.m.

CARSON CITY -- Angry legislators are demanding answers from Nevada officials over how an outside company could embezzle at least $608,000 and maybe more than $1 million in state funds.

Lawmakers also want to know when a backlog of medical claims created by the scam will be honored.

"I'm afraid we're going to walk away from this without ever knowing what this is going to cost," said Assemblywoman Jan Evans, D-Sparks, at a hearing Thursday.

State Budget Director Perry Comeaux and others trying to unravel alleged embezzlement by L&H Associates were called before the Interim Finance Committee.

From August 1996 until this year, L&H processed state health insurance claims and managed an $85 million account. The state Committee on Benefits fired the company May 28 after uncovering a scheme in which claims reportedly were paid into phony accounts. The scam came to light when a woman received paperwork for a kidney dialysis she never had.

Officials hope to absorb the loss through a $1 million bond L&H was required to take out.

The FBI White Collar Crime Unit in Las Vegas is investigating the scandal. L&H director Frank Rousseau is facing criminal action in an alleged insurance rip off in Joliet, Ill.

Nevada Insurance Commissioner Alice Molasky-Arman fined L&H Administrators and a related firm, Benefits International Inc., a total of $4,000 and pulled their licenses.

Comeaux told the legislative panel Thursday that a new company, UICI Administrators of Irving, Texas, has begun processing 106,000 health insurance claims.

Comeaux said UICI has processed 8,638 claims by Sept. 2 and planned to "get current with all claims" by January 1998.

Comeaux also told the panel, which convenes between legislative sessions to handle budget matters, that the Committee on Benefits will meet Wednesday to develop stricter controls over such third party administrators.

He said the committee will implement a "checks and balances" system to insure that one employee can't gain access to claims records without having to go through other workers.

He said the alleged scam involving L&H, which could have occurred in a one- or two-week period, might have been a "hit-and-go type of scheme."

Comeaux said the committee also would ensure that future companies are licensed before they begin operating in Nevada. He denied reports that L&H wasn't licensed.

Sen. Bob Coffin, D-Las Vegas, an insurance broker, criticized state officials for hiring an out-of-state company to replace L&H and for not putting out a bid.

Comeaux said the state was in a bind to find somebody to process claims. UICI is handling the remainder of L&H's contract through March, said state Risk Manager David Thomas. A bid will go out to sign a company in March to a four-year contract, he said.