Nationwide, the health insurance marketplace is facing tougher times. Across the
country, the cost of health insurance is increasing and consumers cope with difficult
choices. Into this climate enter shady operators seeking to take advantage of consumers.
Calling themselves "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
that these entities are not legitimately exempt from state laws, but instead are
offering unlicensed health insurance.
These entities claim that they are not subject to state insurance regulation because
of "ERISA." Some claim that producers are used only as "labor consultants" or "business
agents" to "enroll" or "negotiate" with potential members, and not to sell. Such
claims should be viewed with skepticism. It is a crime to solicit or sell an unauthorized
Legitimate ERISA plans (plans governed by the federal Employee Retirement Income
Security Act of 1974) and union plans may be exempt from state insurance regulation,
which is why criminals try to fool people by making these claims. However, legitimate
ERISA or union plans are established by unions for its own members or by an employer
for the employer's own employees. They are not sold by insurance producers.
Read all materials and websites carefully. Consider the following list of some circumstances
and plan characteristics that should prompt your very careful investigation, including
contacting the Alabama Department of Insurance:
- The plan operates like insurance but claims that it is not.
- You are asked to avoid certain insurance terminology, even though the plan operates
- The plan is covered only by "stop loss insurance" or refers to "reinsurance."
- You are asked to sell an "ERISA" plan or "union" plan.
- You are asked to sell an "employee leasing" arrangement with self-funded health
- The plan targets individuals or groups with employees that have pre-existing conditions.
- The plan advertises unusually low premiums and/or unusually generous benefits, low
(or no) minimum requirements for participation, and loose (or no) underwriting giudelines.
Insurance producers should contact the Alabama Department of Insurance anytime they
are approached by an entity that seems suspicious. If you are asked to sell health
coverage and it is represented as exempt from insurance regulation under "ERISA"
or as a "union" it is probably illegal. The insurance producer who does not inform
the Alabama Department of Insurance takes an enormous risk. A producer who fails
to report, and sells, an "ERISA" or "union" plan should expect to lose his/her license,
to possibly be subject to criminal prosecution and to face personal liability for
any claims incurred under the unlicensed coverage.