A week after Zoom Management settled a legal dispute with its largest investor, the company has settled a separate dispute with Oregon insurance regulators related to the company’s health plan and established that Zoom violated the insurance code.
The global settlement resolves the Department of Consumer and Business Service's complaint with no findings of falsification or other intentional wrongdoing by Zoom Health Plan, Zoom Management Inc. or its officers, directors or owners, Zoom Management announced.
DCBS is fining Zoom co-founders Dr. Dave Sanders and Dr. Albert DiPiero and the company a combined $285,000, among the largest DCBS has levied against an insurance company in recent memory, said DCBS spokesman Jake Sunderland.
The settlement establishes that Zoom violated the insurance code by filing financial statements that included a $3 million surplus note that had not been funded.
"The size of these fines shows that DCBS will not tolerate repeated violations of the insurance code," Jean Straight, acting director of DCBS, said in a statement. "The settlement allows Zoom Health Plan to meet its financial obligations to policyholders, without spending additional dollars and resources on costly investigations and lawsuits."
DCBS last April placed the short-lived health plan into receivership while it winds down operations by the end of the year. The agency then promptly sued Zoom Management Inc. to recover $3 million in cash for the insurance plan. In its 2016 annual financial statement, Zoom Health Plan reported capital and surplus of $2.9 million. But without the cash from the note, it was insolvent, DCBS said. The lawsuit called the financial statement “materially misleading and inaccurate.”
Zoom Management will pay $2.1 million to fully satisfy its obligation to provide funding to Zoom Health Plan and to cover remaining member claims.
Zoom will pay $150,000 in civil fines for late filings of the annual registration statement and other documents and for disputes related to the mistaken identification of a loan as a cash asset in the financial statement.
Sanders will pay a civil penalty of $100,000 and DiPiero will pay $35,000 for the late filing of personal financial statements.
The loan from Zoom Management to the health plan was to cover the plan’s “risk adjustment” payment under the Affordable Care Act. The health plan had projected it would be billed $3 million by the federal government for the payment. While Zoom Management would loan the funds, it believed the loan wouldn’t need to be fully funded until the payment and exact amount came due, Zoom 's announcement says. In July, the federal government billed Zoom Health Plan $2.1 million, about $900,000 less than projected.
The lawsuit over the loan has been dismissed with no findings of fraud, misappropriation of funds, and no further investigation or litigation.
Sanders and DiPiero issued a joint statement saying they never intended to do anything wrong, but acknowledged they were late in their filings. It reads, in part:
“We are pleased to have this matter completely closed and behind us so that we can continue to serve the hundreds of thousands of people who rely on us for their healthcare. While reaching this settlement was best for all parties, we are confident that we operated a successful health plan in a turbulent market. Based on the professional advice of experienced health plan staff, we believed that the note did not need to be fully funded until the Risk Adjustment payment came due and that ZHP’s annual statement filing was consistent with statutory accounting standards.
"We do not challenge the State’s authority to issue fines in this case; however, we are confident we made timely requests for extensions to most filings and carefully navigated complex and changed DCBS rules governing personal financial statement filing requirements and ultimately submitted fully compliant personal financial statements.”
The Portland Business Journal is a KGW News partner.