Producer Information

Producer: Beware of unlicensed health insurance plans

The health insurance marketplace is facing tough times. Across the country, the cost of health insurance is increasing and employers and consumers are coping with difficult choices. Into this climate enter shady operators seeking to take advantage of the situation. Calling their products "ERISA exempt," "ERISA plans," "union plans," "association plans," or some variation thereof, these entities boast low rates and minimal or no underwriting.

Remember, if it seems too good to be true, it probably is. There is a good chance these entities are not legitimately exempt from state laws, but instead are offering unlicensed health insurance.

The Oregon Insurance Code prohibits soliciting or selling an unauthorized insurance product.

These entities claim they are not subject to state insurance regulation because of ERISA, the federal Employee Retirement Income Security Act of 1974. Some claim that producers are used only as "labor consultants" or "business producers" to "enroll" or "negotiate" with potential members, and not to sell. Such claims should be viewed with skepticism.

Legitimate ERISA and union plans may be exempt from state insurance regulation. However, legitimate ERISA or union plans are established by unions for their own members or by an employer for the employer's own employees. They are not sold by insurance producers.

Before you become involved, read all materials and Web sites of these plans carefully. Investigate any plan that:

• Operates like insurance but claims that it is not.
  
  
• Is covered only by "stop loss insurance" or refers to "reinsurance."
  
  
• Targets individuals or groups with employees that have pre-existing conditions.
  
  
• Advertises unusually low premiums and/or unusually generous benefits, low (or no) minimum requirements for participation, and loose (or no) underwriting guidelines.
  

Be wary if you are asked to:

• Avoid certain insurance terminology, even though the plan operates like insurance.
  
  
• Sell an "ERISA" plan or "union" plan.
  
  
• Sell an "employee leasing" arrangement with self-funded health coverage.

To find out if a company is licensed to sell insurance in Oregon, call our Company Section, (503) 947-7982, or check our Web site.

Contact the Oregon Insurance Division any time you are approached by an entity that seems suspicious. If you are asked to sell health coverage that is represented as exempt from insurance regulation under ERISA or as a "union plan," it is probably illegal.

An producer who sells this type of plan could expect to lose his or her license, to possibly be subject to criminal prosecution and to face personal liability for any unpaid claims incurred under the unlicensed coverage.

Anyone with information about an entity offering health coverage without a license should contact Douglas Beck, market analyst, (503) 947-7204.