Workers Bilked by Phony ‘Health Insurance’ Firms

Employees of small firms across the country are being bilked by self-funded “health-insurance” providers who simply walk away with all their premiums when faced with payment of large claims, federal and state law enforcement officials said Tuesday.

Testifying before a Senate subcommittee, authorities identified Rubell-Helm Insurance Services Inc. of Irvine as a key example, contending that $10 million in legitimate medical claims were unpaid when the firm went out of business earlier this year.

Sen. Sam Nunn (D-Ga.), chairman of the permanent investigations subcommittee of the Senate Governmental Affairs Committee, said that Rubell-Helm “has been shut down by three different states--California, Florida and Texas--for operating an illegal insurance operation.”

Rubell-Helm no longer has an address or telephone listing in Southern California. Neither Michael Rubell nor James Helm, its two partners, could be located for comment. State officials said the firm is the subject of a federal criminal investigation as well as a defendant in many civil suits filed by claimants who were never paid.

Nunn, whose views were shared by three state insurance commissioners who testified at the hearing, said a growing number of firms like Rubell-Helm “are nothing more than sophisticated pyramid schemes.”

In such cases, small claims are paid from the monthly premium income received from an ever-expanding list of enrolled employees, while large claims generally are ignored or delayed until the firm finally disappears or goes under.

Employees believe they have full insurance coverage and “by the time anyone has caught onto this scheme, the operators have usually skipped town, often moving into another state . . . to avoid the reach of state insurance authorities,” Nunn said.

Raymond Maria, the Labor Department’s acting inspector general, said most abuses are found among firms known as “multiple-employer welfare arrangements” because the practitioners enroll employees from several small firms to obtain a larger premium base.

He said state insurance officials “simply are not equipped to effectively deal with these schemes in which racketeers and money move quickly from state to state and in some cases to offshore accounts.”

But a federal law governing such health plans is murky because it gives conflicting responsibilities to state and federal authorities, according to Jo Ann Howard of the Texas State Board of Insurance.

Tom Gallagher, Florida’s insurance commissioner, testified that Marilyn Tabor, a former controller for Rubell-Helm, stated in an affidavit that funds routinely were taken out of accounts containing premium payments to cover operating expenses.

Before dissolving their firm, Rubell and Helm paid themselves $369,200 a year in salaries and used company funds to remodel their homes and pay $100,000 to a personal tailor and $5,000 to an exercise consultant, Gallagher said.