Health Insurance Broker Collected Two Ways, State Ohio Says: Health Insurers Paid Agency for Business From School Districts

By Bill Bush, The Columbus Dispatch, Ohio

Aug. 18--The Ohio Department of Insurance has accused a Columbus-based insurance broker of unfair and deceptive business acts against the South-Western, Delaware and Zanesville school districts.

The department notified Fritz Neuhart and his company, Joseph James & Associates, this week that they could lose their insurance licenses.

The allegations bring two more Ohio school districts -- Delaware and Zanesville -- and a second major insurance provider -- Medical Mutual of Ohio -- into the state's investigation of insurance companies' secret payments to brokers. The payments were made to compensate the brokers for steering business to the companies.

South-Western schools have sued Joseph James & Associates and the district's insurer, United Healthcare of Ohio, accusing United of a conflict of interest when it paid the brokerage $645,000.

Neuhart has done nothing wrong and will demand a departmental hearing, his attorney, Kort Gatterdam, said yesterday.

Gatterdam accused state Insurance Superintendent Ann Womer Benjamin of going after the little guy while cutting "back-room deals" with the insurance companies that made the payments.

"Who created these (payment) programs?" Gatterdam asked. "The insurance companies. And what do they do? They go sit in the back room with Ann Benjamin and take care of everything."

Womer Benjamin signed settlement agreements this year with United and Anthem over secret payments to brokers, without disclosing how widespread the practice was. Womer Benjamin said state law prohibits her from making the investigation public. United paid a $175,000 fine, while Anthem paid $30,000.

The Insurance Department had no comment on the case against Neuhart, spokesman Robert Denhart said yesterday.

United Healthcare also was the insurance provider for Delaware schools' 432 employees, but the notice, released yesterday, doesn't say how much money the department thinks the company paid Neuhart for that account.

An Insurance Department hearing officer recommended last month that a broker for Columbus Public Schools pay the district $127,000 for not disclosing that he was taking money from United Healthcare.

Christine Blue, treasurer of Delaware schools, said, "If there are any funds to be returned to the taxpayers of the Delaware community, we hope that it will be pursued to the fullest."

Delaware schools paid Neuhart's company $35,889 since 1998 to analyze competing insurance companies' products, prices and policies and recommend the best deal for the district, Blue said. The district no longer uses the company.

"He was supposedly an uninterested third party," Blue said. "He was to work for the district, our interest only, and that was made very clear."

Zanesville schools paid Neuhart's company $2,000 a month to consult on health insurance for its nearly 600 employees and didn't know he was being paid by the district's insurance provider, Medical Mutual of Ohio, district Treasurer Cindy Nye said.

"His role was that of a consultant. We paid a fee, and (he) shopped around at different health-insurance companies to see where we could get the best deal," she said.

In a written statement, Medical Mutual said yesterday that it believes compensation paid to Neuhart was proper.

United Healthcare was not aware of the Insurance Department case against Neuhart, and it does not involve them, spokeswoman Debra Spano said.

Womer Benjamin is close to deciding the case against Kevin P. Grady, the former broker for Columbus schools, Denhart said.

The school district paid Grady $137,000 over four years, while United paid him $517,000.

bbush@dispatch.com

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Copyright (c) 2006, The Columbus Dispatch, Ohio

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