Commissioner’s Bulletin # B-0004-07
February 02, 2007
TO: PREFERRED PROVIDER ORGANIZATIONS AND THE TEXAS PUBLIC GENERALLY
RE: UNAUTHORIZED HEALTH INSURANCE
The Department continues to be concerned about unauthorized health insurance plans operating in and from Texas and about claims going unpaid by such plans. The U.S. General Accountability Office has found that more than 200,000 policyholders nationwide over a three-year period have been affected by unauthorized health insurance plans, leaving at least $252 million in unpaid medical claims to policyholders and providers. The Department seeks the help of preferred provider organizations (PPO's) in combating this problem.
To avoid such losses for Texas policyholders and providers, the Department is again urging and advising PPO's to exercise and document appropriate due diligence to establish that the proffered health benefit plan is not unauthorized insurance, prior to entering into any contract with a person offering or providing a health benefit plan in this state. This due diligence includes, but is not limited to, the following measures.
(1) For any insurance coverage that is represented as relating to the health benefit plan, the PPO should:
(a) contact the insurance carrier to verify that the named insurer has actually issued the policy or is being represented by the person soliciting the PPO contract;
(b) conduct a detailed review of the policy to determine whether the coverage is as represented; and
(c) refer to www.naic.org, www.tdi.state.tx.us, or call the Texas Department of Insurance at 800-252-3439 to confirm that the insurer is an admitted insurer in this state.
(2) For any health benefit plan represented as established pursuant to a collective bargaining agreement, the PPO should verify that the plan is indeed established or maintained pursuant to such an agreement under the criteria provided by 29 CFR 2510.3-40.
(3) For any health benefit plan represented as established by an employee leasing arrangement, the PPO should confirm that the plan is fully insured and issued through an authorized carrier using the procedures described in item (1).
(4) For any health plan represented as established by a single employer, the PPO should confirm that the plan covers solely employees and their dependants of a single employer as defined by the 1974 Employee Retirement Income Security Act and that the employer controls and directs the work of the employees.
The following is a list of some circumstances and product characteristics that should prompt a PPO to further review and investigate a health benefit plan or product. While these circumstances and characteristics do not conclusively determine whether a health benefit plan or product is or is not part of an unauthorized insurance scam, this list is meant to assist PPO's in reviewing and investigating health benefit plans or products.
· The product operates like insurance but claims that it is not insurance or claims that it is only providing benefits and not insurance.
· The product claims to be "fully funded," "fully insured" or "reinsured" but the plan's agents or sponsors do not name the carrier insuring or underwriting the product.
· The plan is marketed to both individuals and employers who are required to join and pay dues to a trade, occupational or consumer "association" solely to obtain health coverage. Also, the enrollees do not control or sponsor the activities of the association, or are not given association bylaws or voting rights.
· Agents market an employee or staff leasing arrangement that is not fully insured.
· The product has unusually lenient underwriting. For example, it accepts and covers individuals with preexisting conditions, even though the individuals have no creditable coverage as described, for example, in Insurance Code §1205.004(a).
The Department asks that you promptly report any potentially illegal operations described in this Bulletin. Note that Insurance Code §701.051 requires all persons to report suspected fraudulent insurance acts to the Department.
Questions about licensure may be directed to the Department's Consumer Protection Division at 800-252-3439. Suspected fraud may be reported to the Department's Fraud Unit at 888-327-8818.
The Department has, in previous years, provided notice on these issues through prior bulletins. More detailed discussion of these issues may also be found in Commissioner's Bulletin's B-0009-02, B-0032-03, and B-0008-06 available on the TDI website, www.tdi.state.tx.us.
Sincerely,
Sara Shiplet Waitt
Senior Associate Commissioner
Legal & Compliance Division
For more information, contact: