[Written November 2013]
Back when I was studying accounting, the Equity Funding scandal was fresh – but the lessons learned from it need to be told to the Obamacare brain trust.
The scam involved creating fake life insurance policies that didn’t exist. It involved a thing called reinsurance where the company that signs up the client then sells the policy to another insurance company who then collects the premiums and pays out the benefits.
The finder’s fees were then used to pay the premiums which then fed creating more fake policies. The company grew very fast and was very profitable.
Equity Funding fell apart when the company that had bought the policies noticed that nobody died and they were not paying out claims. It’s pretty hard to fabricate a death certificate for a person that doesn’t exist.
If insurance companies can directly sign up people and get a $6-10k “subsidy” payment, it doesn’t take a genius to see that someone might start creating fake people to get the subsidy – and then have a bunch of people that go the entire year without making a claim.
You know, if the insurance company isn’t “blue”, it could be a “bad apple”