Insurance commissioner urges defeat of bill

Friday, July 22, 2005 | 10:37 a.m.

CARSON CITY -- State Insurance Commissioner Alice Molasky-Arman Thursday called on Congress to defeat a bill that would strip the states of regulation over certain health insurance plans.

In a press release, Molasky-Arman said the legislation, to be voted on next week by the House of Representatives, would "reopen the door to health insurance scams that have previously put thousands of Nevadans at risk."

And the Protect Your Healthcare Coalition in Las Vegas, a group that says it has a wide array of members, said "state regulation of the health care market is the only way to ensure proper protection of Nevadans."

Molasky-Arman said the federal government would be left to regulate the so-called Association Health Plans and would not be able to close down fraudulent schemes as fast as the state.

Association health plans are groups, such as small businesses, that join together to buy health insurance coverage. But the policy they buy may be from an unlicensed company that takes the premiums, pays a few claims and then disappears.

The statements of Molasky-Arman and the coalition were issued after release of a report by Mila Kofman, an assistant research professor at Georgetown University's Health Policy Institute, who said the federal bill "would exacerbate the problem of health insurance fraud perpetrated against small businesses and their workers."

Kofman said "scams flourished" after Congress stopped states from regulating these policies in 1974. In 1982 Congress restored the authority of both the state and federal government to regulate to better protect consumers covered by associations and multiple employer arrangements.

She said during a "recent cycle of scams, 144 operations left over 200,000 policyholders with over $252 million in medical bills." Kofman said it would have been higher if there were no state regulation. From 2000 to 2002 state investigators shut down 41 illegal operations selling coverage through phony and real associations while the federal Department of Labor closed only three operations.

As an illustration of the problem, Molasky-Arman cited the case of Michael Harvey of Henderson. He purchased a health insurance policy from a bogus company, TRG Marketing, LLC. She said the company never paid the medical bills of Harvey or the workers in his small business.

The insurance commissioner said Association health plans have been tried before, under the name of Multiple Employer Welfare Agreements. She said another plan, Employers Mutual, LLC, a Nevada corporation, "preyed on over 1,800 Nevadans and ultimately left $25 million in unpaid claims nationwide." In Nevada there was more than $1 million in unpaid claims.

Nevada's insurance division closed both TRG and Employers Mutual, an insurance division spokeswoman said.

Molasky-Arman said she has expressed her concerns to Nevada's Congressional Delegation in an attempt to sidetrack the legislation (H.R. 525).

The coalition said many of its active members are small businesses and it is imperative the state be able to protect them from these frauds.

The coalition said its membership includes Gov. Kenny Guinn, Attorney General Brian Sandoval, the American Cancer Society, the Nevada Diabetes Association, Nevadans for Affordable Healthcare, Nevada Insurance Underwriters Association and Anthem Blue Cross/Blue Shield.

The Kofman report said the scams involve association and multiple employer arrangements involving health insurance coverage.

The federal bill, Kofman said would rely on self-reporting and self-regulation. There is nothing to prevent scam operators, even those with a prior felony conviction or those who have been shut down in the past, from owning or managing an association health plan, under the federal legislation, she said.