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GAO: Bogus Health Plans Fleeced 200,000 Individuals

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GAO: Bogus Health Plans Fleeced 200,000 Individuals


Some 200,000 individuals had health insurance coverage between the years 2000 and 2002 from entities that were not authorized to sell it and which failed to pay at least $252 million in medical claims, says a new report from the United States General Accounting Office.

Presented at a Senate Finance Committee hearing, the GAO report says every state in the union was affected by these illegal operators, although southern states were most affected.

According to Kathryn G. Allen, director of health care, Medicaid and private insurance issues for GAO, these unauthorized entities characterized themselves in several ways to give the appearance of legitimacy. Some claimed to be exempt from state regulation, she says, while others selected names that resembled those of legitimate insurers.

Typically, Allen says, 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, she says, took action against these entities and tried to increase public awareness. For example, Allen says, of the 144 entities identified from 2000 through 2002, state insurance departments issued cease and desist orders against 41.

States also took other actions such as filing civil or criminal cases against these entities. Insurance agents who sold the coverage, Allen adds, were fined or had their licenses revoked.

The Labor Department, she says, obtained court orders against 3 large entities that prevented their operations nationwide.

Karen Ignagni, president of the Washington-based AHIP, says health insurers are embarking on a 3-part initiative to address the problem.

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

Second, Ignagni says, health insurers renew their call on the National Association of Insurance Commissioners to create a national online database of licensed health insurance companies accessible by consumers, employers and agents.

Third, she says, AHIP is forming a special task force to explore other strategies that can be employed to expose abuses.

Reproduced from National Underwriter Life & Health/Financial Services Edition, March 12, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.