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Sham Health Insurance Plans
At Issue
Health care costs continue to rise and as a result, individuals, employers and families have faced annual increases in their health insurance premiums. These increases have been difficult for everyone to swallow and many look for lower cost alternatives, frequently encountering fake health insurance plans. Fake (sham) health insurance plans are plans created to look like authorized health insurance plans but are never intended to pay benefits or abide by state insurance laws. These plans leave consumers with little recourse and large amounts of debt.
Confusion exists over who has the regulatory authority to investigate and prosecute fake health insurance plans, the Department of Labor or state Departments of Insurance. Many fake health insurance plans are sold through licensed agents, who can be held liable for selling unlicensed, fraudulent products. As a result, NAHU has been active in educating our members on fake health insurance plans and providing them with information to verify the legitimacy of any product he or she intends to solicit. Licensed insurance producers and consumers should verify the legitimacy of any product before putting any money down. Individuals, families and employers are all at risk of becoming victims of fake health insurance plans.
A few red flags:
- Health insurance plans with premiums dramatically lower for a similar product on the market.
- Health insurance plans that offer to provide coverage for all, regardless of pre-existing conditions.
- A producer who indicates he or she does not need a license to sell this insurance product or indicates this product is exempt from state regulation.
- A health insurance plan that does not use the word insurance anywhere in its materials or documents.
Medical Discount Plans -- Red Flags for Consumers & Health Insurance Producers
Informative Websites
AHIP: America 's Health Insurance Plans - Website devoted to consumer fraud issues. Includes a downloadable 30 second PSA.
Coalition Against Insurance Fraud - An organization devoted to helping reduce fraud in insurance and increase consumer awareness.
State Department of Insurance - MEWA contacts put together by the National Association of Insurance Commissioners (NAIC).
Additional Resources
M-1 MEWA Forms: Click here to view the Employee Benefits Security Administration's (EBSA) database of registered Multiple Employer Welfare Arrangements (MEWA). Disclaimer: Neither NAHU nor the Department of Labor endorses, approves or disapproves of the registered MEWAs.
Department of Labor Employee Benefits Administration: Focus on Health Care Fraud
Employers and Individuals are Vulnerable to Unauthorized or Bogus Entities Selling Coverage - United States General Accounting Office - GAO-04-312 - February 2004.
Don't Fall Prey to Health Insurance Fraud - MSNBC - April 23, 2004
Articles on Sham Plans written by Mila Kofman, Kevin Lucia and Eliza Bangit of the Health Policy Institute at Georgetown University in conjunction with the Commonwealth Fund.
- Health Insurance Scams: How Government is Responding and What Further Steps are Needed
- MEWAs: The Threat of Plan Insolvency and Other Challenges
Testimony before the Senate Committee on Finance March 3, 2004: “Health Insurance Challenges: Buyer Beware” - Three panels including:
Fred Nepple: Chair of the ERISA Working group, NAIC
Jose Montemayor: Comissioner of Insurance, Texas Department of Insurance
Mila Kofman: Assistant Research Professor, Health Policy Institute, Georgetown University
For more information, please contact Jessica Waltman, Legislative Director of Research.
Content copyright © 1998-2009 National Association of Health Underwriters. All rights reserved.
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