Fake Health Insurance Plans for Schools, Nonprofits, Small Businesses

by Barry Zalma, Esq., CFE

Handwritten Insurance Claim Form with pen and calculator

Gerald Rising Jr., a health-plan owner pleaded guilty to fraud and money-laundering that ruined the health insurance of school districts, nonprofits and small businesses, was sentenced in March 2012 to 5½ years in federal prison. Rising also was ordered to pay $3.5 million restitution to victims and must serve three years of supervised release after his term.

He owned Rural Health Plan Initiative and administered self-funded health insurance for dozens of smaller entities. Each employer paid in premiums to be held in trust for covering medical claims, and Rising promised to provide backup insurance for catastrophic events. Rising, 60, admitted he misled clients about the reinsurance, raised his salary to siphon off client funds, commingled funds to pay claims, and kited checks to cover up the losses. The clients were liable for their claims when Rising didn’t pay them, and some employees are left with hundreds of thousands of dollars in bills from major illnesses.

One hospital said it had more than $1 million in unpaid bills for medical services to RHPI clients.

When Rising pleaded guilty in October, the government said losses from the fraud ranged between $2.5 million and $7 million, affecting 50 to 250 businesses, nonprofits and individuals.

It’s not wise to look for “deals” when acquiring insurance, especially when others will be depending upon it. Find reliable professionals and confirm the existence of your policies with the insurance companies themselves.

  • Before entering into business with a health insurer that is not one of the major, well-known and funded insurers, check with your state’s Department of Insurance to determine the assets of the insurer and the insurance or reinsurance backing up the insurer. If it does not exist, it’s not a risk worth taking.


Barry Zalma, Esq., CFE, is a California attorney, insurance consultant and expert witness specializing in insurance issues including fraud. Mr. Zalma has also written a number of books and writes a free newsletter on insurance fraud. See his new program on insurance fraud, “Who Got Caught?” online at www.WRIN.tv.