Thousands of consumers across the nation knew it as Employers Mutual, but in Iowa, residents knew it as either the American Coalition of Consumers or the Construction Trade Workers Association — bogus associations that offered "health insurance" to their members, such as employers. But no matter what they called it, by the time the cat was out of the bag, more than 22,000 customers of Employers Mutual LLC had racked up an estimated $4.5 million in unpaid health insurance claims.

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While the unsuspecting customers visited their doctors, the principals of the unlicensed health insurer and its affiliated associations diverted more than $6 million of the health plan's assets into their own personal bank accounts.

In December 2001, the Iowa Insurance Division issued an emergency cease-and-desist order against Employers Mutual and the United States Department of Labor filed a lawsuit in the U.S. District Court of Nevada against the officers of the company, alleging that they sold health insurance without a license, violating the Employee Income Retirement Security Act (ERISA).

While legitimate ERISA plans allow individual employers to establish self-funded health insurance plans that are exempt from state licensing regulations, plans that provide coverage to more than one unrelated employer do not meet this federal exemption requirement. "Multiple- employer welfare arrangements," or MEWAs, must be licensed by the states in which they do business.

Employers Mutual and the bogus associations it created allegedly collected $14 million in health plan premiums nationwide and paid out only $3 million in claims, according to the Department of Labor. The government's lawsuit seeks a court order restoring all losses and illegal profits received by Employers Mutual and its bogus associations.