HomeMy WebLinkAbout2017-06-05-Resolutions 17-272_Order and Consent to Order ApprovalTHE CITY OF WAUKEE,IOWA
RESOLUTION 17-272
APPROVING STATE OF IOWA —IOWA INSURANCE DIVISION ORDER AND
CONSENT TO ORDER IN THE MATTER OF TWO RIVERS INSURANCE COMPANY
INC.
IN THE NAME AND BY THE A UTHORITY OF THE CITY OF WA UKEE,IOIYA
WHEREAS,the City of Waukee,Dallas County,State of Iowa,is a duly organized Municipal
Organization;AND,
WHEREAS,the City of Waukee has entered an Iowa Code Chapter 28E agreement with Iowa
Governmental Health Care Plan (IGHCP)to pool risk for health benefits as an insurance
purchasing group for Iowa public employers;AND,
WHEREAS,Two Rivers Insurance Company is the plan administrator of the IGHCP group;
AND,
WHEREAS,the State of Iowa,Iowa Insurance Division has completed an investigation of Two
Rivers Insurance Company Inc and has issued their Order and Consent to Order,Division File
No.82465;AND,
WHEREAS,the City of Waukee as member of the 28E agreement,is specifically listed in
Exhibit A of the settlement agreement,to receive a portion of the settlement as determined by the
Insurance Commissioner to be $25,54 L47.
NOW THEREFORE BE IT RESOLVED by the City Council of the City of Waukee,Iowa on
this 5ea day of June,2017 that the Order and Consent to Order,including Exhibits A &B,is
hereby approved and accepted b2 the City of Waukee,and the City Administrator is hereby
authorized to sign Exhibit B,Election to Participate and Release.
il tarn Pe d,yor
Attest:
Rebecca D.Schuett,City Clerk
ROLL CALL VOTE
Anna Bergman
R.Charles Bottenberg
Brian Hamson
Shelly Hughes
Larry R.Lyon
AYE
X
X
NAY ABSENT ABSTAIN
BEFORE THE IOWA INSURANCE COMMISSIONER
F I IL E 6
(vtAY 22 rOI7
COMMISSION OF INsoaANcs
IN S-ISVISION OF iOWA
IN THE MATTER OF
TWO RIVERS INSURANCE COMPANY,DIC.
NPN 3274643,
d/b/a Two Rivers Insurance Seivices,
and Employee Benefit Systems;
Respondent.
)Division File No.82465
)
)ORDER AND
)CONSENT TO ORDER
)
)
)
)
NOW THEREFORE,upon motion of Ihe iowa hisurance Division ("Division")and
consent of Respondent Two Rivers Insurance Company,Inc,,pursuant to the provisions of Iowa
Code Chapter 507B—Insurance Trade Practices and Iowa Code Chapter 522B—Licensing ot'
Insurance Producers,the Commissioner enters the following consent order ("Order'*);
L PARTIES A".ID JURISDICTION
1.The Commissioner of Insurance,Doug Ommen,administers Iowa Code Chapter 507B-
Insurance Trade Practices and Iowa Code Chapter 522B—Licensing of Insurance Producers
pursuant to Iowa Code I'I 505.8.The Commissioner has desigirated staff in the Iowa Insurance
Division to seelc enforcement of these provisions.The Division has consented to the entry of this
Order.
2.Two Rivers Insurance Company,Inc,("Two Rivers")is an lowe corporation with a home
office of 214 N.Main Street,Burlington,Iowa 52601.Two Rivers does business under several
fictitious naines,including,but not limited to "Two Rivers Insurance Services"and "Employee
Benefit Systems,"Two Rivers has filed fictitious name registrations with the Iowa.Secretary of
State to do business under these names.
3.Two Rivers d/b/a Tvvo Rivers Insurance Services is and has been licensecl as a business
entity insurance producer with the Division since October 29,2010,Two Rivers is licensed under
national producer number 3274643.
4.Two Rivers d/b/a Employee Benefit Systems is and has been licensed as a thirrl party
administrator with the Division since January 21,2000.
5.The Commissioner of Insurance has jurisdiction over Two Rivers and this matter.
6.The Division has alleged that fiom January I,2005 to on or about May I,2014 ("2005
through 2014"),Two Rivers and others engaged in acts or praotices constituting cause for
probation,suspension,revocation,fines,orders requiring such persons to cease and desist from
the acts,methods or practices,or other relief under Iowa Code tj)505.8(10),5078,3,5078.4,
5078.6,5078.7,5228.11 and 5228.17 and tnies adopted pursuant to Iowa Code Chapters 505,
5078 and 5228.
7.Two Rivers is aware of its right to notice and a hearing on this matter,the right to be
represented by counsel at a hearing,the right to present evidence and examine witnesses at a
hearing,and the right to appeal fiom any adverse determination after a hearing.Two Rivers,by
consenting to tlfis Order,knowingly and voluntartly waives these rights,including all riP~ts to
appeal or otherwise contest the validity of this Order.
g.Two Rivers,by its officcrs and attorneys,knowingly and voluntatfiy enters into this Order.
Two Rivers denies the allegations found herein and denies that it has engaged in any unlawful acts
or practices.
II,STIPULATIONS Olz PACT
9.Iu 2005,several public entities organized the Iowa Govennnental Health Care Plan
("IGI-ICP")under Iowa Code Chapter 28E.IGHCP was an agreement to pool risk for health and
other welfare benefits as an insurance purchasing group of'Iowa public employers.
10.Through the efforts of Two Rivers anrl others,Wellmark,Inc.began writing health
insurance coverage for IGHCP fiom its inception.Wcllmark,Inc.("Wellmarlc")is a mutual
insurance company that was incorporated under the laws of the state o'f Iowa on September 14,
1939.Wellmark is authorized by the insurance commissioner to issue individual and group health
insurance.Wellmark*s group health insurance plans are governed by various insurance laws
including Iowa Code Chapter 509.
III.DIVISION'S ALLEGATIONS
11,Wellmarlc is required by iowa Code IJ 432.1 to report to the state of Iowa gross premiums
received during the prcccding calendar year in order to determine prranium tax liability.Wellmarlc
filed premium tax returns for each of the years of 2005 through 2014,annually reporting gross
direct written premnun.
12.In establishing premiums for IGHCP,Wellmarlc established an initial premium for each
member through the use of actuariai standards.
13.On an anuual basis thereafter,Wellmark established premium rates for IGHCP for each
renewal plan year fi om 2006 tlu'ough 2014.A plan year for IGFICP ran lrom July 1 of any given
year to June 30 of the subsequent year.
14.To facilitate the IGHCP yearly insurance renewals,Two Rivers received up to twenty plans
from Wellmark each year.Two Rivers then stnictured approximately tliree times as naany plans
with various levels of self-funding dependent upon the nee s o eac I P mern er.
15.From the years 2005 throulm 2013,Mutual Med Insurance Seiwices,LLC ("Mutual Med")
was the wholesale agency for Wellmarlc Wellmartc required Two Rivers to operate through a
wholesaler to receive Welhnark plans.Wellmark's premiums included commission of I'/o.For
the time piniod of 2005 tlrrough approximately July 2013,Two Rivers did not receive any portion
of the commission paid to itviutual ivlcd.In approximately July 2013,Mutual Med negotiated an
increase in the commission percentage and foiwarded .25'/0 of its commission to Two Rivers.
lvlutual hIed was terminated by Wclhnark as the wholesale agency effective approxhnately
October I,2013 and Two Rivers then received all of the commission that previously went to
Mutual Med until approximately March 2014.Two Rivers held,in a septarate ledger account,botli
the .25'/0 received from ivlutual Med and the full commission received after Ivlutual Med's
termination pending advice.
16,Two Rivers added compensation.,whether described internally as "EBS billing fee"or
"Comniission to Two Rivers,"to Wellmark's premium rates for each member of the IGHCP for
each plan year fiom 2005 until April 2014.
17.During the years of 2005 tluouJi 2014 Two Rivers's compensation was totaled with
Welbnarlc rates and then presented to each member of IGHCP on rate suriuuaries on an annual
basis and on monthly billings in various ways as premium (e.g."insurance company premium,"
"medical premium,"or "IGH CP P i emium").Two Rivers ilid not separately itemize or disclose its
fees a»d/or commissions in the materials provided to IGHCP met»hers.
COUNT I
Iowa Code eI 5078,3
18.Iowa.Code sS 507B,3 provides:
A person slrall not engage in tins state in any trade practice which is defined in this
p t
competition,or an unfair or deceptive act or practice i»the business of insurance.
19,lowe Code ft 5078.6 pi'ovides:
Whenever the commissioner believes ths.t any person has been engaged or is
engaging in this state in any unfair method of competition or any unfair or deceptive
act or practice whether or not delined in section 5078.4,5078.4A,or 5078.5 and
that a proceeding by the commissioner in respect to such method of competition or
unfair or deceptive act or practice wou!d be in the public interest,the commissioner
shall issue and serve upon such person a statement of the charges in that respect
and a notice of a hetudng on such charges to be held at a time and place fixed in the
notice,which shaH not be less than ten days after the date of the service of such
notice.
20.Iowa Code I't 5078.7(l)provides that upon determining that a person has engaged in an
unfair methoil of competition or an unfair or deceptive act or practice,the Commissioner shall
order the person to cease desist and may order a civil penalty not to exceed ten thousand dollars,
unless the person knew or should have knoivn that they were in violation of this subtitle,in which
case the penalty may not exceed fifty thousand dollars in any six-month period.
21.Iowa Code )505.8(10)provides:
The commissioner may,after a heiudng conducted pursuant to chapter 17A,assess
fines or penalties;assess costs of an examination,investigation,or proceeding;
order restitution;or take other corrective action as the commissioner deems
necessary and appropriate to accomplish compliance with the laws of the state
relating to aH insurance business transacted in the state.
22.The Division has alleged that dunng the perio of 2005 through 2014,Two Rivers engaged
in unfair and deceptive acts and practices in violation of Iowa Code tt 5078.3 by presenting various
monetary amounts as "premium"on rate summaries provided on an annual basis and on monthly
billings to each of the members of IGHCP that,in fact,included Wegmarl&premium rates plus
Two Rivers'compensation and that such representations hsd the capacity to mislead members into
believing the piesenterl amounts were entirely premium established by WeHmarl&and concealed
the amounts of Two Rivers'compensation.
23.Violations of Iowa Code lj 5078 3 and applicable miles as alleged would constitutegrounds
for the imposition of a civil penalty,an order of restitution,and an order requiring such person to
cease and desist fiom the unfair and deceptive acts,methods or practices pursuant to Iowa Code
t)1)507B,6 and 507B,7.
COUNT II
Iowa Code $522B.11
2d.Iowa Code $522B.I I (I)provides:
The commissioner may place on probation,suspend,revoke,or refuse to issue or
renew an insurance producer's license or may levy a civil penalty as provided in
section 5228.17 for any oiie or more of the following causes:
b.Violating any insurance laws,or violating any regulation,subpoena,or order of
the commissioner or of a commissioner of another state.
lc Using fmudulent,coercive,or dishonest practices,or demonstrating
incompetence,untrustworthiness,or financial irresponsibility in the conduct of
business in this state or elsewhere.
25.Iowa Code $522B.17(1)provides:
An inrairer or insurance producer who,after hearing,is found to have violated this
chapter may be ordered to cease and desist from engaging in the conduct resulting
in the violation and may be assessed a civil penalty pursuant to chapter 507B.
26.The Division has alleged that during the period of 2005 through 2014,Two Rivers violated
Iowa Code &St)522B,II(1)(b)and (g)in the conduct of business in this state by adding
compensation to the Weilmark premiums and presenting the increased dollar amounts to members
of IGIICP as "premiiuu."
27.Violations of Iowa Code I)522B.I 1(1)and applicable miles as alleged would constitute
grounds for revocation,suspension,censure,,the imposition o('a civil penalty,an order of
restitution,and an order requiring such person to cease and desist from the unfair and dcccptive
ac s,me o s orprac tees pursuan o owa o e an
IV,AGREED CEASE AlrlD DESIST ORDER
Two Rivers,conscnts to entry of a voluntary cease and desist order and,prior to the entry
of this Order,changed the practices at issue in this Order by disclosing the amount of the
Wellrnartc-established premiums and by entering into consulting agreements with members of
IGHCP in order to charge and disclose fees for Two Rivers'services.
r iOW THEREFORE,IT IS ORDERED that Two Rivers Insurance Company,lnc,,and
its officers,direct.ors,agents and representatives,shall not engage in any act or practice in violation
of Iowa Corle tlsS 507B.3 and 507B.6 and shall not engage in the following practices:
A.Adding Two Rivers'compensation to rus insurer-established premium and representing
such monetary amount as "premium"on rate summaries or on monthly billings provided
to members of IGHCP,or using any similar representations or formats that have a capacity
to mislead members into believing the represented amounts are entirely premium
established by the insurer;and
B.Failing to separately disclose or itemize Two Rivers'fees or other compensation,apart
ficm the insurer-established premium,to the extent they are included on rate summaries or
on monthly billings provided to members of IGHCP.
This Order does not proldbit Two Rivers from using an insurer-established premium to
structure partial self-funding plans so long as the insurer-established premium,any pat%tel self-
funding contributions;and any commissions,fees or other compensation apart from the insurer-
established premium are disclosed as separate line itcnss to the extent they are included on rate
summaries and on monthly billings.
V.RL'STITIITION
IT IS FURTEIER ORDERED that Two Rivers Insurance Company,Inc.shall pay
contemporaneous with its consent to this order the amount of $1,314,029.10 to the state of Iowa
to the credit of the Settlemcnt Fund of the Iowa Insurance Division,as restitution to be rlistribut ed
to past and current IGHCP members in accordance with the allocations in Exhibit A,attached and
incorporated herein.
As a condition of receiving the allocated restitution,the IGHCP member must agree to sign
the Election to Participate and Release which is attacherl as Exhibit B and incorporated herein by
reference.If the IGHCP member does not sign the Election to Paidicipate and Release,the
allocated restitution sum will be distributed amongst the participating members,The Division will
notify the IGHCP members of this within thirty (30)days of the issuance of this Order,IGHCP
members will have sixty (60)days following the notification period to return the signed Election
to Participate and Release to the Division.
VI.RIGEIT TO REOPEN
IT IS FURTHER ORDERED that the Division's agreement to,and the Commissioner's
issuance of,this Order,is expressly premised upon the trtithfulness,accuracy,and completeness
of the Two Rivers's representations concerning its ability to pay a financial penalty,including a
restitution amount.If,upon motion by the Division,the Cormnissioner finds that Two Rivers
failed to disclose materia assets,misrepresented the value of any asset,or made other material
niisreprcsentations or omissions,this matter may bc reopened for the purpose of assessing
additional restitution amounts and civil penalties.
VII.RELEASE
IT IS FURTHER ORDERED that upon iinalization of this Order and payment of the
required funds,the Division,and the Commissioner,acknowledge that this Order releases the
Respondent,Two Rivers Insurance Company,Inco its current and former board members,
directors,officers,employees,with the express exception of Kerry Bits,Scott Saveraid,and Kevin
Carr,ficm liability for any additional civil or administrative penalties or actions by the
Commissioner,the Division,or the staff of the Division in connection with Two Rivers's bilhng
practices relating to fees,commissions,or other compeusation charged to groups organized under
28B agreements and any conduct and violations of Iowa insurance laws as described in this Order.
Upon finalization of this Order and payfnent of the required funds,the Division and the
Commissioner,acknowledge that this Order releases Two Rivers Financial Group,Two Rivers
Bank &Trust,and Two Riversfs successors fiom liability for any additional civil or administrative
penalties or actions by the Commissioner,the Division,or the staff of the Division in connection
with Two Rivers's billing practices relating to fees,commissions,or other compensation charged
to groups organized under 28E agreements and any conduct and violations of Iowa insurance laws
as described in this Order.
This Order does not release Respondent trom civil or criminal liabilities,if any,that may
be asserted by any other goveumiental entity.
EOOROEREO fdf .k1 d 7 f id ',2277.
DOUGLAS M.
Iowa Insurance
OMMEFI
Commissioner
Respectfully submitted
~AG L
Compiiance Attorney
lowe Insurance Division
Two Ruan Center
601 Locust Street,4'"Floor
Des Moines,IA 50309
j ohannanageIQaiiddowa.gov
515.725.1255
Attorney for the Iowa Insurance Division
Copies to:
Michael Richards
Davis Brown Law Firm
215 10'"Street,Suite 1300
Des Moines,IA 50309
Susan Freed
Davis Brown Law Finn
215 10n Street,Suite 1300
Des Moines,IA 50309
Sarah Crane
Davis Brown Law Finn
215 10"'Street,Suite 1300
Des Moines,IA 50309
Attorneys for Respondent
CONSENT TO ORDER AND AGREZtVIENT
r,/~I~4wdtl,'r lst r LI if rr s el'0»o r r,
Inc.,Respondent in this matter,have read,understood,and do knowingly consent to this Order in
its entirety.By executing this consent,I understand tltat Two Rivers Insurance Company,Inc,is
waiving iLs rights to a hearing,to confiont and lnoss-examine witnesses,to produce evidence,and
to judicial review.
I further understand that this Order is considered final administrative action that may be
reported by the Division to the National Association of Insurance Commissioners and to other
regulatory agencies,I also understand that tins Order is a public record under Iowa Code Chapter
22 that will be disclosed io other state regulatory authold ties,upon request,pursuant to Iowa Code
section 505.8(8)(d).I also understand that the Order wiii be posted to the Division's web site and
a notation will be made to the publicly available web site record that alhninistrative action has
been talcen against me.
Dated this C'P day of a 2017.
TWO RIVERS INSURANCE l PANY,INC.
y
8 ~Subscribed and sworn before me on this day of t2o~.,2017.
Notary Publio for the State of Iowa
+«s HEATHEHMARIEHOWELL
F Commission Number 8041 30
My Commission Expires
April 28,2020
EXIIIBIT A
Central Lee (wfPSF)
Chickasaw Co.
City of Clive
City of Council Bluffs
City of Fairfield
City of Grinncll
City of Harlan
City of Keokuk
City of Pe!la
City of Pen3
City of Spencer
City of Waukee
City of Waverly
City of Webster City
Clay County
Clayton County
Counci!Bluffs Public Library
Council Blu.ffs Waterworks
Dubuque County
Emmet County
Grundy County
Gutlirie County
Hancock County
Henry County
Humboldt County
Jefferson County
Keokuk CSD
Monor.a County
Pol.tawattarnie County
Seymour CSD
Spencer CSD
Union County
Wiruiebago County
41,023.73
1,876.72
32,856.94
253,428.10
28,315.60
3,273.67
21,321.00
53,247.26
25,835.43
8,878.00
20,330.70
25,541.47
1,981.12
9,823.98
35,480.28
35,670.11
8,201.95
24,511.65
11,894.56
21,094.58
52,322.10
21,551.95
50,994.04
63,502.99
43,395.22
37,586.91
135,315.05
18,725,22
143,356.02
18,374.12
50,551.36
8,054.57
5,712.71
Total 1,314,029.10
NOTbc The abcve-reference amounts are subject to change with tbo aniounts going up should a listed
member decline io participate.
KXIIIBIT B
ELECTION TO PARTICIPATE AND RKLKASK
as (posit!011)and on behalf of
(entity name)elect to participate in the distribution of the restitution amount
ordered pursuant to the consent order ("Order")entered into by the iowa Insurance Division and
Two Rivers Insurance Company,Inc.,on ,2017 regarding matter number g2465.
By executing this election and receiving a payment for restitution,(entity)
agrees to release Two Rivers Insurance Company,Inc.,its current and former board members,
directors,officers,employees,with the express exception of Kerry Erts,Scott Saveraid,and Kevin
Carr,iiom liability for any civil claims or penalties in connection with Two Rivers's conduct as
described in the Orden (entity)further agrees to release Two Rivers Financial
Group,Two Rivers Banlt dt Tiust,and Two Rivers Insurance Company,Inc.'s successors from
liability for any civil claims or penalties in connectiou with Two Rivers's conduct as described in
the Order.
Dated this day of ,20)7.
(ENTITY NAME)
By (")
Subscribed and sworn before mc on this day of ,2017.
Notary Public for the State of Iowa