Shell companies, phantom employees, and ERISA preemption abuse

This story is one of the most brazen abuses of ERISA preemption I’ve seen.
- Shell companies
- “Employees” with no real employment
- Self-funded ERISA plans
- Selling noncompliant individual coverage disguised as group insurance

State insurance departments flagged it—but say they’re powerless. The plans are technically ERISA-covered, which limits state oversight.

This isn’t just a regulatory gap. It’s a full-on structural exploit.

Questions worth asking:
- Did these entities secure stop-loss coverage, and if so, how??
- What due diligence did TPAs, brokers, and networks perform?
- Should there be a stronger federal standard for defining a legitimate “employer” under ERISA?

This isn’t about one bad actor. It’s about whether our regulatory framework can keep up with schemes that look compliant on paper but are hollow underneath.

If you advise employers or work in plan design, this one’s worth a close read.