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Bogus insurance firms exploit employers seeking affordable coverage.

The U.S. Department of Labor (DOL) and state governments have identified nearly 150 firms that sold health insurance between 2000 and 2002 but were not authorized to do so, leaving at least $252 million in unpaid medical claims.

Most of the bogus entities operated in southern states, although every state was affected by at least five of the firms. The unauthorized entities covered at least 15,000 employers and more than 200,000 policyholders.

With health insurance premiums rising at double digit rates in recent years, more employers and individuals seeking affordable coverage are falling prey to scams perpetrated by unlicensed entities. Characteristics common among at least some of these entities include the following:

* Adopting names that are similar to those of legitimate firms;

* Setting premiums below market rates; and

* Paying initial claims while collecting additional premiums before ceasing claims payments.

One bogus entity, Employers Mutual, adopted many of these characteristics as it collected approximately $16 million in premiums from 22,000 people in 2001, leaving $24 million in medical claims unpaid.
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Publication:The Journal of Employee Assistance
Article Type:Brief Article
Geographic Code:1USA
Date:Apr 1, 2004
Words:173
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