California regulators shut down alleged health insurance scheme

"Kaiser got every penny," Palombo said. Members "were getting the insurance. They were getting everything from Kaiser with no problems whatsoever."

Kaiser spokesman Jim Anderson said that "many payments were late at best."

Palombo disputed the contention of the department and Kaiser that there were nearly 500 consumers involved. He said the plan never had more than 50 members. Palombo said he did nothing to put members' coverage at risk and put the blame for that on the department.

"They lost coverage because the Department of Managed Health Care issued a cease-and-desist order," he said. "That's why they lost coverage."

Palombo declined to comment on the enforcement actions in other states. He said he continues to sell health insurance on an active broker's license issued by the California Department of Insurance, a separate agency.

The Department of Managed Health Care oversees companies covering more than 21 million people primarily through health maintenance organization plans.

To avoid getting caught up in such a problem, consumers should be on guard against labor unions that offer to sell them health insurance without performing any other traditional services, such as collective bargaining for wages and other benefits, said Michael McClelland, an enforcement lawyer for the department.

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lisa.girion@latimes.com