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Iowa Warns Agents Against Fraudulent Health Plans

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NU Online News Service, Sept. 10, 10:02 a.m. – Iowa Insurance Division has placed on its Web site a warning to health insurance agents to beware fraudulent small business health plans.

A number of states have recently reported encounters with entities claiming to be exempt from state insurance laws, the division says.

These plans, which claim to be exempt from state law under Employee Retirement Income Security Act, in fact meet the definition of Multiple Employer Welfare Arrangements under the employee retirement act which makes them subject to state insurance regulation, the division says.

Such plans often use insurance agents to market the coverage, the division says. Initially, claims are paid, but only for a short period of time, the division says.

The consumer is left with responsibility for payment of claims, and the agent can lose her license and face criminal prosecution, the division says.

Legitimate employee retirement act plans and union plans can be exempt from state insurance regulation, the division says. People selling fraudulent health plans try to fool agents and consumers by claiming their plan is exempt as well. However, legitimate plans of this nature are established by unions for their own members or by an employer for her own employees. In most cases, insurance agents do not sell them, the division says.