Labor Dept. targets fraudulent insurance plans

The Labor Department announced new steps Monday to crack down on fraud in certain employer-based healthcare plans.

The new rules, which implement part of the healthcare reform law, target multiple employer welfare arrangements (MEWAs). The Labor Department said MEWAs, through which multiple employers join together to offer health coverage, are a magnet for fraud.

The people who promote and operate the plans often divert premiums for their own use, leaving employers and individuals stuck with unpaid claims, the department said. It said the policies have been able to circumvent state laws that require plans to keep enough cash on hand to pay claims.

The new regulations require MEWAs to register with the Labor Department before setting up operations in a new state and allow the department to shut down MEWAs it believes are fraudulent. The Labor Department has previously needed a court order when it identified possible fraud. That gave unscrupulous operators more time to further drain their plans’ reserves, according to a Labor Department fact sheet.