Family Law

An Insurance Scam With More Layers Than An Onion

The ways in which surrogacy can go sideways keep surprising us.

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(Image via Getty)

I swear most surrogacy journeys don’t end in disaster. Or a complicated legal dispute. Most matches actually end with two very happy sides — the intended parents, who grow their families with a new addition; and the gestational surrogate, who is justly compensated and who is content knowing that she forever changed the lives of a family.

But as readers of this column know, the ways in which surrogacy can go sideways keep surprising us. I don’t know what Sarah Koenig, famed journalist and podcast host of Serial, is up to these days, but she should really check out this situation and let us know if Robert Park and the rest of the Omega crew are guilty — in this case of heinously defrauding families at their most vulnerable — or are, as they claim, mere victims themselves.

Over the past couple years, Omega Family Services (“Omega”) — or Lyfgro (pronounced like “Life Grow”), among other names that have been used — have been aggressively selling an insurance product called PregnancyCare to gestational surrogacy matching programs and their clients. The product looked promising and seemed to solve a major reoccurring problem in the surrogacy space. Promising enough that, according to numbers reported by Omega, around 700 hopeful parents purchased the PregnancyCare insurance policy to provide coverage for medical complications and delivery costs for pregnant gestational surrogates.

Too bad it all turned out to be a scam, leaving surrogates’ credit in danger and hopeful parents — many of whom suffered years of costly and painful fertility treatments before turning to surrogacy — on the hook for enormous medical bills.

It Looked Good. At First. 

One of the major obstacles for gestational surrogacy arrangements is finding insurance that covers the surrogate’s pregnancy and delivery healthcare costs. While many women who raise their hands to be surrogates already have health insurance, a large number of those policies have provisions specifically excluding any coverage for surrogacy pregnancies. Meaning the insurance is good for a surrogate’s own pregnancies, but not for a pregnancy where she is acting as a surrogate for someone else. As an alternative, many intended parents are able to find a surrogacy-friendly policy through the Affordable Care Act market — but those policies are only available to be purchased for the following year in the narrow few months of open enrollment, and, depending on the surrogate’s location, may not be available at all.

Sponsored

So in came PregnancyCare. While not cheap, at approximately $1,000 to $1,350 a month (premiums went up during the time the product was being sold), the policy promised to cover the surrogate’s pregnancy-related medical costs. Hurray!

Crumbling Bricks.

As what appeared to be a viable and not-outrageously-expensive option (compared to other private insurance options in the $30K and up range), PregnancyCare was popular. And the policy seemed to be working. At first. Claims were being paid.

Last fall, however, rumors started to swirl that PregnancyCare was no longer paying claims, and that it was cancelling policies. Indeed, with only nine days’ notice, PregnancyCare canceled all policies as of October 31, 2020 — an especially scary Halloween for policyholders. Omega Family Services subsequently filed for bankruptcy in California on December 23, 2020. A public hearing was held by Zoom on January 19, 2021, and, oh boy, was that an unusually popular bankruptcy hearing.

The Hearing.

Sponsored

At the hearing, Robert Park, one of the owners of Omega Family Services, the broker selling the PregnancyCare product, testified. But his testimony was evasive, to say the least. Omega’s bankruptcy reports showed that it had no assets. Like, literally nothing. Meaning nothing to be distributed to its many victims. Apparently all those monthly $1,000-plus premiums from 700 intended parents (so, you know, $700,000-plus a month) were going to Omega Insurance Company Segregated Portfolio, a Cayman Islands company. Probably. Despite Park also being a major shareholder in Omega Insurance, he refused to answer any questions that pertained to that entity, as the hearing was only for Omega Family Services. He also, interestingly, started out his statement implying that Omega Family Services was merely another victim of COVID-19.

That, no one buys.

Bankruptcy expert attorney Justin Leonard took the lead on questioning Park. Among his questions were several inquiries about monetary transfers from Omega Family Services to other Omega-ish entities. Park explained that the transfers were done to help with “cash flow” of the other entities. Hmm.

Were The Omega Guys Victims Themselves? 

In a December 2020  email titled “Update December” sent out by Omega Insurance (the Cayman entity) “To All Concerned Parties,” the company explained that PregnancyCare was licensed through a nationally admitted insurance carrier named State National “as they were given a contract purporting the same.” However, State National adamantly claims that they never had such a contract, and were never involved with the PregnancyCare product or any of the Omega companies.

Omega alleges that it relied on services from a captive insurance company consultant, Brandon White, of Ambassador Captive Solutions. And, in an what initially appeared to be unrelated (but now directly related) case in Kentucky with AIG, White has been accused of forging contracts. State National intervened in the AIG case upon learning that its name was being used in a number of insurance schemes. Those schemes included the “counterfeit policies issued to Omega Family Services” that “purport to provide medical coverage to family surrogacy services clients in the California area.” The Omega Insurance email to the concerned parties explained that “As a result of the dispute [the Kentucky case], State National immediately terminated our license and declined to continue licensing [PregnancyCare.] … The unique nature of PregnancyCare prohibited an alternative licensing agreement to be found in time to carry forward the insurance plan.”

But it wasn’t that State National “terminated” the license. There was never any relationship with State National to begin with. Of course, a key question is: who knew that? And when?

Insurance Economics Are Complicated.

I spoke with surrogacy insurance expert Sarah Paige of ART Risk Financial and Insurance Solutions. Paige explained that, she, too, was hopeful that PregnancyCare was a viable option, but to her the numbers on PregnancyCare raised some doubts. She noted that the average pregnancy costs $18,000. In addition to paying medical bills, a policy has to pay the costs of third-party administrators, claim processors, network access fees, brokerage, licensing, reinsurers, and any potential investors. And, importantly, unlike other insurance policies where only some percentage of members are likely to submit claims, this policy was specifically designed for and sold for use by surrogates, with, like, an expected 100% usage. But with trusted names in insurance like AXA, State National, and Lloyd’s of London being represented as backing the product, she understands why so many people — many after extensive research — were persuaded to purchase the policy.

The next Omega Family Services bankruptcy hearing is scheduled for February 18, 2021. Expect the plot to thicken again before the truth is eventually revealed.

Ellen Trachman is the Managing Attorney of Trachman Law Center, LLC, a Denver-based law firm specializing in assisted reproductive technology law, and co-host of the podcast I Want To Put A Baby In You. You can reach her at [email protected].

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