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Alert:   Unlicensed vs. Mainstream Health Insurance

"If it sounds too good to be true, it probably is", applies to mainstream health insurance also. If it's way cheaper than everything else on the market, it's probably not collecting enough money to pay claims. This happens most commonly when coverage is not licensed by the state and therefore is not mainstream health insurance.

The operators of the unlicensed health "insurance" plan may have no intention of paying claims. If they do have the intention, they may not know what they are doing.

The big premiums that have to be paid for mainstream health insurance are big for a reason. The claims are big. Coverage that qualify the insured for a health savings account (hsa) may provide some price relief, but the medical inflation rate is still high, pushing the claims cost, and therefore the premiums, higher and higher.

Consider licensed non-profit companies providing mainstream health insurance. Are huge salaries being paid out of proportion to the rest of the business world? No. So why aren't the premiums lower? The premiums are high because modern medicine is very expensive and getting more so.

Attractive low premiums from unlicensed health "insurance" offerings can not be trusted because they can't be collecting enough money to pay today's high claims costs.

Mainstream health insurance regulation


The typical consumer does not have the resources to check on the ongoing financial integrity of any indemnity arrangement, indemnity meaning reimbursement for expenses incurred. That is why there is insurance regulation.

Without oversight by a regulatory body, who knows what the operators are doing with the money.

It can be bad enough even when there is oversight. Underpriced plans may meet the minimum requirements for a while but finally go under. The state insurance regulator steps in when the operation becomes too financially weak, but there can still be damage done to some consumers.

When there is no regulation, the collapse is typically much more severe. Additionally, with regulated mainstream health insurance, some states have a special fund that will at least pay unpaid claims up to a certain limit. Unlicensed operations have no such protection.

Often, the unlicensed plans operate as Multiple Employer Welfare Arrangements ("MEWA") marketing through professional associations. The unlicensed MEWA is formed under color of Federal law. However, the federal law was not intended for MEWA's to be sold to the general public or businesses in general without state licensing. However, there are licensed MEWA's that are legitimate and operate as the law intended.


When in doubt, check with your state's insurance regulatory authority regulated health insurance to make sure the apparently good deal is at least licensed. None of these regulatory authorities are associated with this website nor do any endorse or approve it.

State insurance departments actively attempt to stop insurance fraud, but it is up to the consumer to be vigilant when looking for mainstream health insurance, because it is not until complaints come in after unpaid claims occur, that the regulators may even be aware that a phony health "insurance" scam is being sold.

Here is an example of a state regulator's page mainstream health insurance on fraud and unlicensed operations and other consumer alerts. The state agency is not associated with this website, nor does it endorse or approve anything on this website, nor necessarily agree with any opinions expressed here. The link is offered as a convenience only.

With our online quoting for mainstream health insurance, we can help you shop for the best deal from legitimate licensed companies.

¶ Nothing on this website constitutes advice or recommendation of any nature, whether legal, tax, financial planning or otherwise. The comments above represent only the author's understanding of mainstream health insurance and may be incorrect or out of date.