Don't Be Taken In By Unauthorized Insurance Entities!

Insurance fraud costs consumers-businessesto be insurance companies, and the long-term
included--an additional $1,500 per year in increasedaffect this has on public confidence in state
premiums. In fact, it can inflate premiums by asregulation of the insurance business.
much as 30 percent -- National Insurance CrimeSome unauthorized MEWA promoters eventually
Bureaupay benefits, but usually only for small claims--and
Small-business owners often have troubleonly to lure more employers into doing business
obtaining affordable health insurance coverage forwith them. More often, these phony operations
themselves and their employees. Where SBOsoften shut down without notice, often leaving
are in need, dishonest predators will invariablymillions of dollars in unpaid claims behind, a trail of
come out of the woodwork to take unfairuninsured employees and beneficiaries, and
advantage, which is one reason why healthdevastated small businesses with no recourse but
insurance fraud is a growing problem in thisbankruptcy.
country.This practice is unfair and deceptive-a third-degree
Illegal Health Insurance Schemesfelony or first-degree misdemeanor in Florida, for
Health insurance fraud usually involves groupone-and carries serious penalties for anyone who
health plans sold to employers for theiris caught, tried and convicted.
employees.Too Good to Pass Up?
Posing as legitimate-sounding but phony unions orIn spite of all that, these plans can appear to be
trade groups, or falsely claiming the backing of bigattractive alternatives to business owners who
insurers, fraudulent insurers prey on employershave given up on buying traditional health
who are badly in need of health insurance by, forinsurance. And the opportunity to sell such
example, offering low-cost health carelow-cost plans can be too enticing to pass up for
coverage-as much as 50% or more below theotherwise honest, if unsuspecting insurance
going rate. Some even say they'll issue coverageagents. But unless they keep their guard up,
regardless of health conditions, and with little or noemployers and agents have no way of knowing
underwriting.that these too-good-to-be-true sounding plans are,
Companies and individuals behind these schemesindeed, bogus.
are seldom licensed in the states in which they doHeed the Warning Signs
business, and they operate by recruiting unwaryBusinesses having difficulty obtaining health
local agents to sell these fraudulent products toinsurance coverage need to look before leaping at
trusting clients. By putting out false information,offers that sound a bit too attractive. Legitimate
undercutting rates and competing unfairly withMEWAs can be a cost-effective way to get
licensed carriers, unauthorized insurance scams arehealth care, but to avoid being taken, business
bilking their customers, and constitute a seriousowners (and producers) are well advised to get
financial hazard to the general public.references, get details, and talk to their legal
Here's the set up...advisors. Ask questions...
Legitimate v. Illegitimate "MEWAs"- Be skeptical if health insurance coverage that
Under federal law, self-insured or fully insuredboast unusually low premium rates.
"Multiple Employer Welfare- Promotional materials that seem deliberately to
Arrangements"--MEWAs-are plans created by twoavoid the word "insurance" or any insurance
or more employers to furnish employee benefits,terms; or offers to waive printed underwriting
such as health insurance. However, unscrupulousguidelines to enroll employers in the plan.
entrepreneurs have found MEWAs to be a handy- A promoter wants to set up a self-funded plan
way to market worthless health care benefits tothat is "reinsured" by an unlicensed insurance
employers for their employees. Here's how...company; or an insurer has "Ltd." or "S.A." in its
While legitimate MEWAs permit individualname. This usually indicates an offshore company
employers to self-insure health coverage for theirthat could spell trouble.
own employees, any plan providing coverage to- A plan claims to be exempt from state
more than one unrelated employer, must beregulation because of its religious orientation or
licensed by the state. Yet dishonest promoterssome other constitutional protection; or the plan
present MEWAs to employers as employeeaccepts people without a medical exam and those
benefit plans covered by the Employeewith serious health conditions that most plans
Retirement Income Security Act (ERISA), whichwould reject.
(they say) exempts them from expensive state- Participating employers have to join an
licensure, reserve, and other regulatory"association" or "union" to obtain coverage; or
requirements and allows them to offer healthhealth care providers complain that their bills have
care and other coverage at such low rates.not been paid.
It just ain't so, and states cannot allow health careLook Before You Leap
coverage to become a con game played on theHere's how to make sure a health plan is being
unsuspecting by the unscrupulous. Yet many ofmarketed by a licensed insurer:
these phony insurers are domiciled outside the- Ask for the insurer's name and check the
United States, further complicating the falsebenefits booklet to see if it names a licensed
information illegitimate MEWA promoters giveinsurers.
employers, and their almost inevitable failure to- Verify claims that a reputable insurance
pay claims.company is backing the plan by contacting the
Other Causes for Concerncompany.
The primary legal issue involving unauthorized- Contact the insurance department to verify that
insurers is the erroneous claim that they're freethe insurance company backing the MEWA is
from state insurance regulation, but other issueslicensed in your state.
are cause for concern. These include:If you've been approached by someone selling
- Inadequate financial backing, and the lack of awhat you suspect is fraudulent health care
federal guaranty fund covering unpaid claims.coverage by someone you think may be an
- Financial impact on the businesses that haveunauthorized insurer--or know an SBO who
fallen for this fraudulent scheme, and the futurebought one these plans--report it to the state
insurability of MEWA-covered employee.insurance department that has jurisdiction.
- Widespread illegal activity by promoters claiming