‘Bogus’ Insurance Companies Leave Patients with Unpaid Medical Bills, Wall Street Journal Reports

The Wall Street Journal on Oct. 2 looks at the increasing number of "bogus" health insurers that have "spr[u]ng up" over the last few years and how those insurers have left many patients "on the hook for their own medical bills." These "[s]purious health insurance schemes" often offer businesses substantial savings on premiums without a reduction in benefits. The insurers typically pay for a few small items such as prescription drugs but then quit paying any claims, leaving policyholders "in the lurch" for any substantial medical bills they may have incurred. The Journal reports that these insurers often "exploit a split in the regulatory system," under which states regulate insurers except those covered under federal law, including self-insured, employer-sponsored and union and trade association health plans. The "flimsy" plans typically say they are exempt from state law and never apply for state licensure. Regulators say there is little they can do to "clean up the mess" that bogus insurers leave behind because the assets recovered after regulators shut the insurers down "rarely come close to matching the premiums collected from customers." Moreover, safety nets, such as state guarantee funds, created to help policyholders, are not available for members of unlicensed insurers. Currently the Labor Department has 102 civil and 17 criminal investigations pending involving multiple-employer health plans (Wysocki, Wall Street Journal, 10/2).