California regulators said they had shut down a labor union health insurance scheme that put hundreds of consumers at risk of losing coverage.

The Department of Managed Health Care said Tuesday that it had obtained an order from an administrative judge barring Raymond and Jean Palombo of Riverside from selling health maintenance organization and preferred provider organization policies in California. The department said the Palombos signed people up as members of the Contractors and Merchants Assn. and sold them health insurance coverage through an affiliated labor union.

The department contended that the Palombos conspired with a union to collect premiums from members but then failed to pay the premiums in full to Kaiser Permanente, the contracted health plan. That, the department said, put nearly 500 people in jeopardy of losing their health coverage.

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