USA Today Examines Rise in Lower-Cost, Often Unregulated Health Plans

The rising cost of health coverage has created a situation "ripe for fraud" by companies that offer low-cost but unlicensed insurance plans, USA Today reports. The "questionable policies" usually are marketed to small employers as a way to pay lower group rates by joining with other employers. Sales agents claim that plans are exempt from state regulations and are instead regulated by the federal Employee Retirement Income Security Act (ERISA), which governs employee benefit plans. But according to USA Today, legitimate ERISA plans only allow unions or single employers -- not groups of unrelated employers -- to self-insure, and such plans are not sold by agents. While legitimate multi-employer purchasing pools do exist, such plans offer licensed insurance coverage and are registered with the states. Others plans claim to offer insurance through unions that do not actually exist. USA Today reports that many plans are "set up as scams," while others often fail because they do not collect enough in premiums to cover medical expenses. Fraudulent or not, when unlicensed plans fold, patients are "stuck with the bills," and employers that offer such coverage also may be liable. Over the past year, the Labor Department has filed suit against a fraudulent insurance plan based in Nevada, and Texas and Florida officials have taken action to stop insurance scams. "We're seeing the devastating fallout of America's crisis in health care," James Quiggle of the Coalition Against Insurance Fraud, said, adding, "These phony plans are spreading quickly because slick salespeople are skillfully preying on people's desperation to find affordable coverage" (Appleby, USA Today, 5/1).