FRAUDULENT HEALTH INSURANCE plan promoters are preying on entrepreneurs, and the government is concerned. A General Accounting Office (GAO) survey in 2003 shows from 2000 to 2002, the U.S. Department of Labor (DOL) and the states found 144 unauthorized entities covering at least 15,000 employers and 200,000-plus policyholders, resulting in at least $252 million in unpaid medical claims. At the time of the survey, only about 21 percent of that amount had been recovered. The DOL told Congress it's trying to crack down on the schemes, but some say Washington lacks the authority to act quickly enough to end them.

Assistant Secretary Ann L. Combs told the Senate Finance Committee, "Small employers are targeted due to the challenges businesses lace in finding affordable health coverage." Combs says, on average, employers end up paying 20 to 30 percent more for similar health coverage than large employers and unions.

Phony promoters claim to provide coverage at premiums well below what licensed insurers charge. They use strategies that make the plans seem legitimate, such as using marketing materials that resemble those from licensed insurance companies, contracting with existing provider networks, and using names of well-known companies. They might pay small claims so members keep paying the premiums, but when significant bills are submitted, they leave individuals high and dry. Once regulators get wind of the scam, the insurance plans dissolve and move to other locations.

 

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