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

DATE: WEDNESDAY, May 16, 1990                   TAG: 9005160642
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A/6   EDITION: EVENING 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

HEALTH INSURANCE FRAUD CITED

A complex maze of federal and state laws governing employer health insurance plans practically invites con artists to prey on consumers, say state regulators who want Congress to change the system.

At a hearing Tuesday by the Senate Governmental Affairs investigations subcommittee, the officials said con artists are using a "regulatory black hole" to set up fraudulent plans and leave thousands of Americans with unpaid medical bills.

The panel is reviewing how the Labor Department and state officials investigate abuse and fraud within such plans, known as Multiple Employer Welfare Arrangements. The plans are normally used by small businesses with no other affordable means of coverage for their workers.

Tom Gallagher, Florida state treasurer and insurance commissioner, called on Congress to return complete control of health care plans for small businesses to the states. He noted the federal law governing such plans was primarily intended to regulate pensions.

Sen. Sam Nunn, D-Ga., subcommittee chairman, said many of the plans were "nothing more than sophisticated pyramid schemes" in which the insurer's ability to pay claims depends on attracting additional participants and premium dollars.

Many of the plans are being "looted by unscrupulous operators" who use premium money to cover outrageous salaries, commissions, personal expenses and entertainment, Nunn said.

Several victims of such schemes also testified. Robert Wagner of Whiteville, N.C., thought he and 50 co-workers at a furniture store had health insurance coverage because they had been paying monthly premiums.

Wagner said he found out the plan was fraudulent after he suffered a heart attack last year and was left with $12,000 in medical bills - roughly the amount of his annual take-home pay. Now, he said, he can't find coverage for himself and his two daughters.

David Ball, an assistant labor secretary who oversees the federal enforcement of pension and welfare benefits, said no one had an accurate picture of the scope of the problem.

He noted that Labor Secretary Elizabeth Dole recently endorsed legislation to require the operators of such plans to register with the government and that she had asked Congress for 130 additional enforcement officers to watch over pension and welfare programs.

by CNB