Letter of credit (L/C) fraud has been revealed at a recently collapsed health cooperative in the US state of South Carolina.

State institutions are now helping the small businesses for which the South Carolina Health Cooperative (SCHC) was formed to find alternative cover.

Affordable insurance

Licensed in 2012, the SCHC was made up of a group of some 530 small firms with 4,600 employees who pooled contributions in a self-funded health plan for employees.

The cooperative was established so businesses with two to 50 employees could form one entity to purchase coverage at less expensive rates than they could obtain individually.

Insufficient funds

But the South Carolina Department of Insurance (DOI) recently seized the cooperative and its bank accounts and announced that SCHC had insufficient funds to pay claims.

The DOI was helping SCHC find another company to underwrite its members when it discovered an investigation in which the cooperative may be a victim of L/C fraud.

L/C fraud

Now it has been revealed that two L/Cs, on the face of it worth US$8 million, are fraudulent. The L/Cs should have been available in the event of insolvency to pay claims.

The DOI and the South Carolina Alliance of Health Plans are now helping the businesses formerly covered by the collapsed cooperative to find alternative cover.

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