
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, April 1, 1994                   TAG: 9404010207
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A3   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

BOGUS INSURERS TARGETED

The government is cracking down on alleged con artists who duped small businesses into buying bogus insurance plans, leaving thousands of families with unpaid medical bills, regulators said Thursday.

Labor Secretary Robert Reich said his agency has filed federal lawsuits against five operations doing business in 14 states. The plans have left as many as 20,000 unsuspecting workers holding the bag for millions of dollars in medical claims, he said.

None of them apparently operated in Virginia.

Reich and others cited the growth of such scams as another argument for President Clinton's health care reform proposal. The Clinton plan would require smaller entrepreneurs who are vulnerable to shady insurance operators to buy employee coverage through cooperatives.

Olena Berg of the Pension and Welfare Benefits Association said the insurance plans were based on unsound actuarial data. In some cases, she said, the plans were subject to outright fraud.

Berg said money paid into the plans by employers and workers often was spent by administrators on lavish salaries and luxury cars. One made alimony payments and paid his daughter's college tuition directly out of premiums, she said.

"These are particularly vicious crimes," said Gustave Schick, assistant inspector general in the Office of Labor Racketeering. "These are working people who thought they had legitimate health insurance."

The Pension Welfare Benefits Administration, a division of the Labor Department, said the crackdown was aimed at either fake unions or "multiple employer welfare arrangements."

Such arrangements usually are set up by a group of small businesses trying to find lower insurance rates for their workers.

The Labor Department said three of the suspected scams involved an insurance operator's offering coverage to a group of businesses while skirting state regulators by claiming that the businesses were self-insured.

In the other cases, the Labor Department alleges that con artists set up bogus unions to offer health plans with lower premiums than would be available through an employer. These schemes did not take in enough money to remain solvent.

by CNB