|
Don’t Be Taken In By Unauthorized Insurance Entities!
By: Bill Willard
Insurance fraud costs consumers—businesses 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 coverage—as much as 50% or more below the going rate. Some even say they’ll
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.
Here’s the set up…
Legitimate v. Illegitimate “MEWAs”
Under federal law, self-insured or fully insured “Multiple Employer Welfare
Arrangements”--MEWAs—are 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. Here’s 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 ain’t 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 they’re 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.
Some unauthorized MEWA promoters eventually pay benefits, but usually only for
small claims--and only to lure more employers into doing business with them.
More often, these phony operations often shut down without notice, often leaving
millions of dollars in unpaid claims behind, a trail of uninsured employees and
beneficiaries, and devastated small businesses with no recourse but bankruptcy.
This practice is unfair and deceptive—a third-degree felony or first-degree
misdemeanor in Florida, for one—and carries serious penalties for anyone who is
caught, tried and convicted.
Too Good to Pass Up?
In spite of all that, these plans can appear to be attractive alternatives to
business owners who have given up on buying traditional health insurance. And
the opportunity to sell such low-cost plans can be too enticing to pass up for
otherwise honest, if unsuspecting insurance agents. But unless they keep their
guard up, employers and agents have no way of knowing that these
too-good-to-be-true sounding plans are, indeed, bogus.
Heed the Warning Signs
Businesses having difficulty obtaining health insurance coverage need to look
before leaping at offers that sound a bit too attractive. Legitimate MEWAs can
be a cost-effective way to get health care, but to avoid being taken, business
owners (and producers) are well advised to get references, get details, and talk
to their legal advisors. Ask questions…
• Be skeptical if health insurance coverage that boast unusually low premium
rates.
• Promotional materials that seem deliberately to avoid the word “insurance” or
any insurance terms; or offers to waive printed underwriting guidelines to
enroll employers in the plan.
• A promoter wants to set up a self-funded plan that is "reinsured" by an
unlicensed insurance company; or an insurer has "Ltd." or "S.A." in its name.
This usually indicates an offshore company that could spell trouble.
• A plan claims to be exempt from state regulation because of its religious
orientation or some other constitutional protection; or the plan accepts people
without a medical exam and those with serious health conditions that most plans
would reject.
• Participating employers have to join an "association" or "union" to obtain
coverage; or health care providers complain that their bills have not been paid.
Look Before You Leap
Here’s how to make sure a health plan is being marketed by a licensed insurer:
• Ask for the insurer’s name and check the benefits booklet to see if it names a
licensed insurers.
• Verify claims that a reputable insurance company is backing the plan by
contacting the company.
• Contact the insurance department to verify that the insurance company backing
the MEWA is licensed in your state.
If you’ve been approached by someone selling what you suspect is fraudulent
health care coverage by someone you think may be an unauthorized insurer--or
know an SBO who bought one these plans--report it to the state insurance
department that has jurisdiction.
Want More? Send questions and comments to w.willard3@knology.net.
br>
About the Author:
Bill Willard has been writing high-impact marketing and sales training for over
30 years—but as Will Rogers put it: "Even if you're on the right track, you'll
get run over if you just sit there.” Through interactive, Web-based
"Do-While-Learning™" programs, e-Newsletters and straight-talking articles, Bill
helps small-business owners and independent professionals get the job done:
profitably improving performance, helping grow your business, skipping expensive
mistakes, making the journey to success faster, smoother, easier. And fun! |
