California cracks down on unlicensed insurer

The California Department of Insurance (CDI) has issued a cease-and-desist order against Innovative Partners LP, alleging the Florida-based company unlawfully sold health insurance plans to thousands of state residents without proper authorization.

The CDI claimed that Innovative Partners marketed and sold what it described as “phony” single-employer health plans while operating as a non-admitted carrier, meaning it was not authorized to transact insurance in California.

The company also, according to a Best Wire report, had no enrollees at the beginning of 2023 but expanded rapidly to more than 14,000 policyholders by the end of that year. Regulators said the total number of affected consumers could be higher, as investigations are ongoing.

The state also issued 10 additional cease-and-desist orders to related entities that allegedly facilitated the scheme. These include third-party administrators, provider networks, and healthcare vendors accused of aiding and abetting the illegal operation, the report said.

Complaints about Innovative Partners began surfacing in 2024. According to the CDI, most centered on allegations that consumers were misled into thinking they were purchasing comprehensive coverage. Instead, they were issued limited-benefit plans - or in some cases, no coverage at all. Many consumers said they only discovered the discrepancies when they sought medical care and were billed for services they believed were covered.

Some policyholders also reported that they had been led to believe they were purchasing plans through Covered California, the state’s Affordable Care Act exchange, or from well-known carriers such as Aetna and Blue Shield of California. The CDI said these sales tactics often involved representatives falsely claiming to be affiliated with those entities.

In its findings, the CDI said Innovative Partners attempted to frame the policies as part of a small business employee benefit plan. However, none of the affected consumers reported any employment relationship with the company, it was stated.

The regulator’s order aims to halt the further sale or administration of the plans in California and warns of potential penalties for continued activity.

“When Californians purchase health coverage, they deserve the full confidence the coverage they are promised will be there when they need it,” Insurance Commissioner Ricardo Lara (pictured above) said in a statement. “Selling insurance without the proper licensing or certification is against the law and puts consumers’ health and financial well-being at risk.”

The CDI has not indicated whether additional enforcement actions or referrals to law enforcement are planned. Innovative Partners has not publicly responded to the allegations, the report said.