In the face of a difficult health insurance market, the purveyors of “the answer” have created products and plans, cloaked them with names, and filled them with terminology that may at first glance make them look like something other than insurance as you know it. You'll be told that they are exempt from Department regulation. Don’t take it at face value. They have not been subjected to Department examination for actuarial soundness or solvency, and they are not backed by any guaranty funding the likely event of insolvency. Your clients may not qualify for guaranteed-issue coverage once this “coverage” ends.
Some tips for analyzing plans claiming to be ERISA:
Is the plan offered to more than one employer? Is everyone a prospect? Any plan involving for than one employer is a Multiple Employer Welfare Arrangement and is subject to licensure and regulation by the Department of Insurance.
Does the employer have a voice in the day-to-day operation of the plan? A true ERISA plan must by single-employer based. Shouldn’t the employer have the power to control the health plan’s operation? Does this plan provide for that control.
Do the organizers or promoters tout their “substantial experience in the insurance industry”? (But didn’t they say that this wasn’t insurance?)
Is someone making a profit? Don’t be misled by mere claims that the entity is nonprofit; it’s easy to print those words on letterhead and forms.
Does the plan purport to be an association plan? Genuine out-of-state group association plans are not subject to Department regulation, but they are underwritten by authorized insurers (Section 627.654, Florida Statutes). The involvement of a stop-loss carrier at some attachment point is not the same as the plan being “underwritten.”
Ask hard questions. Make them commit. Conduct your own due diligence.
By the way, it is both a violation of the Insurance Code and a crime to solicit to sell an unauthorized insurance product; by touching it you will jeopardize your Florida insurance license. Likewise if an unauthorized insurer fails to pay claims, the agent who sold the product is responsible for payment (Section 626.901, F.S.)
In sum, If it seems too good to be true, it probably is. STAY AWAY FROM IT.
.... The most recent generation of health insurance scams was recently hatched. Billed as a VEBA (Voluntary Employees’ Beneficiary Association), their promoters and the agents who sell them again twist reality to suit their needs — all to the detriment of the consumers who depend upon you.
A VEBA is a creature of the Internal Revenue Code (Sections 419 and 419a). It is not an insurance concept. Instead, it is merely a vehicle by which certain employee benefits, including health-care benefits, can be funded. It is a tax-exempt (not regulatory-exempt) vehicle that allows an employer to deduct payments made to the VEBA to fund the payment of employee benefits. It may afford certain tax benefits including allowing the use of pre-tax dollars to fund benefits. Although promoters often use the word “trust” in conjunction with a VEBA, it does not change the basic nature of a VEBA.
So explained, the next question is obvious: Who or what is the risk-bearing entity to which the consumer and provider looks for the payment of claims? A third-party administrator? An agent, broker or MGA? One whose name you recognize? One that at present has a Florida license? Regardless of how advanced the administration may be, a TPA is not authorized to bear risk. Regardless of whether the broker or MGA claims to be your “life partner” in the deal, they don’t bear risk. Don’t be fooled just because the promoter of the plan now has a license.
As has been said over and over again, unless the plan is single-employer based and fully self-insured, the risk-bearing entity must have a Certificate of Authority from the Florida Department of Insurance as an insurer or as a multiple employer welfare arrangement (MEWA) — it is that simple. If the scheme does not meet the fully self-insured and single-employer based criteria, it is subject to both licensure and regulation by the Department — regardless of what the promoters say. Under current law, a MEWA is never eligible for ERISA pre-emption from state insurance regulation.
Because a VEBA is merely a funding mechanism (and a very complex one at that), the need for either a fully self-insured, or a fully licensed risk-bearing entity persists. The fact that the VEBA (the funding mechanism) is a creature of federal law does not change that reality at all — again, regardless of what the promoters say. ERISA is a creation of federal statutory law, and the VEBA concept is not a part of that body of law.
The fast-talkers will argue that they have filed, or will file, the Form 5500, which validates ERISA status, and thereby, pre-emption from state insurance regulation. Bull. The reality is that anyone can file a Form 5500 for anything and doing so, in and of itself, is meaningless. It’s akin to saying, “I’m an insurance agent, and I play the piano.” One thing has nothing to do with the other. The only thing that counts is an official written determination or opinion by the United States Department of Labor on the bona fides of that plan in its then-current form. You cannot rely upon anything short of that as proof of pre-emption from state insurance regulation, especially from a fast-talker who has led you down this path before.
Don’t do it. Your professional and personal reputation, your license, your livelihood, and most importantly, the welfare of the people whom you serve are at risk if you do.