Insurance company was a sham

ACTION LINE
Miami Herald
4-17-02

Q. My employer's health insurance provider, United States Workers of America Local 16, based in Sparta, N.J., filed for bankruptcy in January.

I recently had a baby and now I'm stuck with unpaid medical bills of $7,000 -- which I can't afford to pay.

Is there anything I can do?

A. Your immediate problem is getting the bills paid. Unfortunately, there's no immediate solution. vv Your best shot at a solution is to file a complaint with the Florida Department of Insurance in Tallahassee. Call the toll free consumer help line, 1-800-342-2762.

The DOI wants to hear from you and other consumers in the same boat.

It says what the Local 16 health insurance plan was doing was illegal.

Hiding behind complicated federal and state regulations and operating like a Ponzi scheme, it eventually ran out of money when members' premiums no longer provided enough funds to cover medical claims.

What recourse you have against it and the people behind it depends on whether its bankruptcy is approved or denied by the U.S. Bankruptcy Court, District of New Jersey (Newark).

That decision isn't expected for months.

You can also consult an attorney who can help you decide whether you can sue the insurance broker who sold your employer the plan.

A broker who markets an unlicensed plan may be liable for your medical expenses and have his or her license revoked by the state.

Florida, like most states, requires that a health insurance plan be licensed. One of the licensing requirements is that it contributes to a guarantee fund, which covers unpaid medical bills if the insurer goes out of business.

Health plans like Local 16 ignore state regulations, and set up shop without the state knowing about it. The state doesn't find out until there's a problem. That's why the DOI needs to hear from citizens -- employers, employees and insurance brokers -- who are concerned about the legitimacy of a health plan. Illegal insurance plans crop up in a tight economy when employers are looking for ways to provide health insurance for employees without going broke doing it.

''We have a problem across the country with these sham plans,'' says Janet Trautwein, an official with the 18,000 member National Association of Health Underwriters in Arlington, Va.

And some sham plans are designed so cleverly that it's difficult for an insurance agent to tell whether they're legitimate, she says.

That's why NAHU encourages all insurance brokers, even if they're not members, to contact it if they come across a suspicious plan. ''We don't want anyone selling them,'' she says.

The DOI wants to hear about them, too. And it will do something about them. It has already shut down four illegal plans in the last 15 months.

TIP OF THE DAY

FINDING A LEGITIMATE COMPANY How can you tell if your health insurance plan is legitimate?

Check with the Florida Department of Insurance. Call its toll free consumer help line 1-800-342-2762 or go to its website, www.fldoi.com. Under Consumer Services, click on Authorized or Approved Insurers.

Unfortunately, the information may not be complete.

''The DOI is precluded by law from divulging the details of an open investigation, including the names of suspected unauthorized entities, until the investigation is closed,'' spokeswoman Nina Bottcher says.

That means that the state may be investigating your insurance plan, but it can't tell you about it until it's finished.

But there are warning signs of an illegal plan. Here's a list of tips from the DOI:

• Determine from the insurance agent the name of the entity that is financially responsible for the payment of claims -- not who issues the checks.

• Call the DOI to determine if that entity is authorized to transact insurance in Florida. If not, stay away.

• Be wary if you are required to join an ''association'' to get the health insurance. Although many ''association plans'' are valid, there has to be an insurer licensed to conduct business in Florida that is financially responsible for paying claims. Be especially wary of being required to join an association that has only a remote or passing relationship to your occupation.

• Be wary if you are required to join a ''union'' in order to access a health plan. Insurance agents do not organize people into unions. The ''union'' is usually just a cover for an illegal health plan that is trying to escape DOI regulation.

• Do not get taken in by very cheap premiums. Legitimate insurers are required to charge premiums that are actuarially sound (in other words, that have some association with reality), and approved by the DOI. The reality is that insurance can be costly, and anyone who offers a cheap, easy answer should be suspect.

• Insurance is complicated. Do not hesitate to ask questions, to demand answers, and to verify the facts yourself.