[Congressional Record (Bound Edition), Volume 151 (2005), Part 13]
[Senate]
[Pages 17401-17402]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        ASSOCIATION HEALTH PLANS

  Mr. KENNEDY. An important new study issued last week finds that 
exempting association health plans from State oversight will lead to 
increased health insurance fraud against small businesses and their 
workers.
  The author of the study, Assistant Professor Mila Kofman at 
Georgetown University, is one of the Nation's leading experts on 
private health insurance fraud, and the report provides evidence of the 
potential harm that the pending association health plan legislation 
will have on patients and working families.
  It finds that exempting association health plans from State oversight 
will ``create a regulatory vacuum'' and have the ``unintended 
consequence of widespread fraud threatening the coverage and financial 
security of millions of Americans.''
  The report notes the 30-year history of health insurance scams 
involving associations and multiemployer arrangements after the 
Congress exempted such arrangements from State oversight in 1974. 
Widespread fraud resulted from the exemption, and Congress acted to 
restore State authority and oversight in 1982. In the years when the 
Federal Government was responsible for oversight of the plans, 
widespread fraud took place and large numbers of businesses and workers 
victimized.
  Insurance fraud involving such plans continues, but without State 
oversight and enforcement, the numbers would have been much worse. 
States have shut down many illegal arrangements, and saved millions of 
dollars for consumers in recent years. We can't afford to take away 
State authority now, and give plans broad exemptions from oversight.
  According to a study by the Government Accountability Office, the 
most common way for insurance scams to proliferate is by selling 
coverage through associations--many of which are the same bona-fide 
professional and business associations that would be shielded from 
oversight under this legislation.
  The pending bill would create large loopholes and shield plans from 
oversight. It relies largely on self-reporting

[[Page 17402]]

and self-regulation, and makes it far more difficult for regulators to 
shut down fraudulent plans.
  The bill's convoluted regulatory structure would also create 
widespread confusion about who actually regulates association plans--
the Federal Government or States, and this confusion will invite scams 
to proliferate.
  We need to make affordable health insurance for working families a 
top priority, but this study shows the serious consequences of 
exempting association health plans from State and oversight and 
enforcement. The result is predictable: mounting medical bills, greater 
bankruptcy, medical care denied or delayed, and coverage lost. It is 
wrong for Congress to turn back the clock to the days of widespread 
fraud against small businesses and their employees by exempting 
association plans from appropriate oversight and enforcement, and I 
urge my colleagues not to take this damaging step.

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