Feds Sue Former Health Plan Administrator

April 19, 2004 (PLANSPONSOR.com) - The U.S. Department of Labor (DoL) has taken to court the former owner of a Memphis-based staff leasing firm for leaving participants in its multiple employer welfare arrangement with as much as $535,000 in unpaid health claims.

Target of the DoL suit was Don Starkey, former president of International Staff Management Inc., who officials charged with not taking reasonable action to make sure the health plan had adequate reserves to pay claims.   The suit also alleges he did not ensure that the plan was covered by stop loss insurance from May 1999 until it was terminated in September 2001.

The plan provided health benefits to approximately 94 participants under a re-insurance arrangement that was administered by American Heartland Health Administrators, Inc. until its insurer defaulted on benefit claims.   In May 1999, Carolina Benefit Administrators was retained by Starkey to take over claims administration.   From May 1999 until the plan was terminated, the plan operated without stop loss insurance and contribution rates created or approved by Starkey that were not adequate to pay claims, the DoL charged.

The suit seeks a court order to require that Starkey restore any losses with interest.   In addition, the suit asks the court to appoint an independent fiduciary to administer the plan and permanently bar the defendant from serving any federally regulated employee benefit plan.

ISM was an employee staff leasing business that provided payroll services, workers compensation services, tax deposits and employee benefits to client employers.