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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.
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