The co-owners of Employee One Benefit Solutions of Baltimore, Md., and the company were fined $50,000 for offering clients rebates in return for being the broker of record for the companies’ health insurance.

Brenndan Michael Mohler and Gene H. Bateman, both of Baltimore, and the company were ordered to pay the fine and cease from any rebating in a consent order dated Dec. 23, 2009. Mohler and Bateman had 30 days to appeal the consent order, which they signed Dec. 22, 2009.

A Maryland Insurance Administration investigation undertaken last year found that the company was offering either free payroll services or free wellness services in return for being listed as the broker of record for some clients’ small-group health insurance plans.

The order did not indicate how many companies had received rebates.

Last August, the MIA received a complaint alleging the company was “engaged in rebating and coerced or tie-in sales,” according to the order.

Enforcement officers from the MIA met with several of the company’s clients, who said they were offered the free services. Later, enforcement officers met with Mohler and Bateman, who each separately admitted offering the rebates, according to the order.

Economic link to rebating eschewed

Former Maryland Insurance Commissioner Ralph S. Tyler, who signed the order, prior to leaving office Jan. 8, said he had no information to suggest illegal rebating is widespread in Maryland. He dismissed a suggestion that a tough economy encouraged agents to consider rebates as a means of protecting or building business.

“I believe that whether companies are struggling in challenging times, they are going to comply with the laws,” Tyler told IFAwebnews.com.

Tyler said the Employee One case shows that “individuals made a mistake, ran afoul of the law and resolved it.”

The commissioner called on agents who see evidence suggesting the possibility of illegal rebating to contact the MIA so it can investigate. “If agents are aware of such cases or any indications, we expect them to make us aware of it,” Tyler said.

Maryland law prohibits a person from “knowingly paying, allowing, giving, or offering to pay, allow, give directly or indirectly as an inducement to the insurance or annuity paid employment or a contract for services of any kind, any valuable consideration or other inducement not specified in the contract, or to offer, promise or give any valuable consideration not specified in the contract.” An exception exists for educational materials, promotional materials or merchandise that cost less than $10.

Employee One was licensed as a resident producer firm Jan. 30, 2007. Mohler was issued a life and health insurance producer license Nov. 9, 2004, and Bateman was issued his license Feb. 14, 2005, according to the order.

This story originally appeared in the February 2010 print edition of Insurance & Financial Advisor.