Dont Be Taken In By Unauthorized Insurance Entities !
Insurance fraud costs consumersbusinesses included--an additional $1,500 per
year in increased premiums. In fact, it can inflate premiums by as much as 30 percent -- National Insurance Crime Bureau
Small-business owners often have trouble obtaining affordable health insurance coverage for themselves and their employees. Where SBOs are
in need, dishonest predators will invariably come out of the woodwork to take unfair advantage, which is one reason why health insurance fraud is
a growing problem in this country.
Illegal Health Insurance Schemes
Health insurance fraud usually involves group health plans sold to employers for their employees.
Posing as legitimate-sounding but phony unions or trade groups, or falsely claiming the backing of big insurers, fraudulent insurers prey on
employers who are badly in need of health insurance by, for example, offering low-cost health care coverageas much as 50% or more below the going
rate. Some even say theyll issue coverage regardless of health conditions, and with little or no underwriting.
Companies and individuals behind these schemes are seldom licensed in the states in which they do business, and they operate by recruiting unwary
local agents to sell these fraudulent products to trusting clients. By putting out false information, undercutting rates and competing unfairly
with licensed carriers, unauthorized insurance scams are bilking their customers, and constitute a serious financial hazard to
the general public.
Heres the set up
Legitimate v. Illegitimate MEWAs
Under federal law, self-insured or fully insured Multiple Employer Welfare Arrangements--MEWAsare plans created by two or more employers to
furnish employee benefits, such as health insurance. However, unscrupulous entrepreneurs have found MEWAs to be a handy way to market worthless
health care benefits to employers for their employees. Heres how
While legitimate MEWAs permit individual employers to self-insure health coverage for their own employees, any plan providing coverage to more
than one unrelated employer, must be licensed by the state.
Yet dishonest promoters present MEWAs to employers as employee benefit plans covered by the
Employee Retirement Income Security Act (ERISA), which (they say) exempts them from expensive state licensure, reserve, and other regulatory
requirements and allows them to offer health care and other coverage at such low rates.
It just aint so, and states cannot allow health care coverage to become a con game played on the unsuspecting by the unscrupulous. Yet
many of these phony insurers are domiciled outside the United States, further complicating the false information illegitimate MEWA promoters give
employers, and their almost inevitable failure to pay claims.
Other Causes for Concern
The primary legal issue involving unauthorized insurers is the erroneous claim that theyre free from state insurance regulation, but other issues
are cause for concern. These include:
Inadequate financial backing, and the lack of a federal guaranty fund covering unpaid claims.
Financial impact on the businesses that have fallen for this fraudulent scheme, and the future insurability of MEWA-covered employee.
Widespread illegal activity by promoters claiming to be insurance companies, and the long-term affect this has on public confidence in state
regulation of the insurance business.
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