General Accounting Office Report Finds Increase in Number of ‘Bogus’ Health Insurers
Health insurance "scams" in which "unauthorized or bogus entities" collect premiums from consumers but do not pay claims have increased in recent years, according to a General Accounting Office report sent to Congress on Tuesday, the New York Times reports. The report found that between 2000 and 2002, 144 unauthorized entities sold health insurance to 15,000 employers -- which accounted for more than 200,000 policyholders -- and that the number of such entities newly identified by federal and state officials increased from 31 in 2000 to 60 in 2002. "They left at least $252 million in unpaid medical claims, only 21% of which had been recovered at the time of our 2003 survey," Kathryn Allen, director of health insurance studies at GAO, said. The report found that more than 25% of the unauthorized entities sold health insurance through associations of employers or individuals, with a focus on small businesses and self-employed workers. According to the report, states with the highest number of unauthorized entities included Texas with 31 and Florida with 30; Illinois and North Carolina with 29; New Jersey with 28; Alabama with 27; and Georgia with 25. Delaware and Vermont had the least number of unauthorized entities with five each. Insurance regulators in 30 states issued 108 cease-and-desist orders against 41 of the 144 unauthorized entities, and the Department of Labor obtained court orders against three that had left $39 million in unpaid claims, the report said. However, Allen said that enforcement of the orders proved difficult because the unauthorized entities maintained few records, hid their assets and did not cooperate with investigators.
Senate Finance Committee Chair Chuck Grassley (R-Iowa), who commissioned the GAO report, said that the number of such unauthorized entities has increased because of "the soaring costs of health care" and the rise in the number of uninsured U.S. residents, the Times reports (Pear, New York Times, 3/3). "We need to 'stop the bleeding' caused by bogus health insurance scams," Grassley added. The committee on Wednesday plans to hold a hearing on the issue (Wysocki, Wall Street Journal, 3/3).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.