NU Online News Service, March 4, 2004, 11:20 a.m. EST ? Washington: Some 200,000 individuals had health insurance coverage between the years 2000 and 2002 from entities that were not authorized to sell it and that failed to pay at least $252 million in medical claims, says a new government report.[@@]

The report from the United States General Accounting Office was presented at a Senate Finance Committee hearing recently.

GAO says that every state in the union was touched by these illegal operators, although southern states were the most affected.

These unauthorized entities characterized themselves in several ways to give the appearance of legitimacy, says Kathryn G. Allen, director of health care, Medicaid and private insurance issues for GAO.

Some claimed to be exempt from state regulation, while others used corporate names that resembled those of legitimate insurers, she says. Typically, these entities set their prices below market rates to be especially attractive to employers and individuals seeking more affordable health insurance.

Both the federal and state governments took action against these entities and tried to increase public awareness, Allen says. For example, of the 144 entities identified from 2000 through 2002, state insurance department issued cease and desist orders against 41. States also took other actions such as filing civil or criminal cases against these entities. Insurance agents that sold such coverage were fined or had their licenses revoked, Allen adds.

For its part, the Labor Department obtained court orders against three large organizations that prevented their operations from spreading nationwide.

Allen says that double-digit premium increases for health coverage have created an environment that makes employers and individuals vulnerable to being exploited by unauthorized or bogus organizations.

“As a result, tens of thousands of employer and hundreds of thousands of individuals have paid premiums for essentially nonexistent coverage,” she says.

Karen Ignagni, president of Washington-based AAHP-HIAA, praises the GAO report and says that health insurers are embarking on a three-part initiative to address the problem.

First, she says, AAHP-HIAA will launch a broad public information campaign to help consumers understand the threat posed by bogus health insurance.

Second, health insurers are renewing their call on the National Association of Insurance Commissioners to create a national on-line database of licensed health insurance companies accessible by consumers, employers and agents.

Third, AAHP-HIAA is forming a task force to explore other strategies that can be used to expose abuses she says.