Broken Promises: Fraud by Small Business Health Insurers.

• Author: Ferrall, Bard R.
• Position: Review

ROBERT TILLMAN, BROKEN PROMISES: FRAUD BY SMALL BUSINESS HEALTH INSURERS (Boston, Northeastern University Press, 1008) 216 pp.

While "health care fraud" is generally thought to mean fraud by claimants or medical providers; the "insider" type of fraud discussed in this book has received little public attention, even though it is probably far more costly than the other types. Although the vast majority of health care plans are legitimate and the operators are honest, some white-collar criminals have diverted large amounts from health insurance funds, leaving the companies bankrupt and claimants without recourse, as shown in the case studies in this book. The developments that created the opportunities for such fraud are analyzed, and obstacles to legal reform that would close those opportunities are discussed. As large health insurance companies withdrew coverage of smaller employers, Congress provided for "multiple employer welfare arrangements" (MEWAs), which would create economies of scale for smaller companies in the provision of health and other employee benefits. To give them a competitive edge, these MEWAs were exempted from state and federal regulation. Free from state licensing and bonding requirements, white-collar criminals could create short-lived firms, quickly accumulate large revenues which would satisfy early claims, while siphoning off most of the funds. After such a scheme collapses or law enforcement catches up with it, new ones quickly form and adapt to changing conditions, in a process known as "recombinant fraud."...