STEVE INSKEEP, host:

And next, let's report on a possible scam involving health savings accounts. Thousands of people are learning the money they squirreled away for health care expenses is gone. Now it appears to have been stolen. Federal investigators have released few details, but all the cases have one thing in common: a Chicago company called Canopy Financial.

NPR's Jeff Brady reports.

JEFF BRADY: On a tree-lined street in Denver, Lon and Wendy Nestrud both work from home - they're in their 40s and self-employed - she's a musician; he's a software consultant. Conventional health insurance was too expensive, so they have a high-deductible plan for things like hospitalization and a health savings account for routine expenses.

In December, Wendy was at the dentist for a regular cleaning. Afterward, she pulled out her health savings account debit card.

Ms. WENDY NESTRUD (Musician): And when I went to pay my card was declined.

BRADY: Wendy knew there was enough money in the account - about $2,000.

Ms. NESTRUD: It kind of set my heart racing. It's like what?

BRADY: The Nestruds called Shawnee Administrative Services, the company that managed their HSA. That's when they learned that another company that processed transactions for Shawnee was in trouble: Canopy Financial's cofounder had been arrested and money was missing from HSA accounts.

The Nestruds were given a toll-free number to call.

(Soundbite of telephone dialing)

Unidentified Man: Youve reached the Canopy Financial Health Savings Account customer information hotline...

BRADY: The message lists a bunch of companies that Canopy Financial processed transactions for, then there's this...

Unidentified Man: Although all the funds for these health savings accounts were supposed to be held in custodial bank accounts, a substantial amount of funds were misappropriated and are now missing. As a result, all of these accounts have been frozen.

BRADY: Hiring a lawyer seemed prudent, but the Nestruds figured that could easily cost them more than the $2,000 in their account. Lon found a Facebook group of others affected by the Canopy bankruptcy. But specifics in the case are still hard to come by.

Mr. LON NESTRUD (Software Consultant): We're now creditors in Canopy Financial's Chapter 7 bankruptcy filing. From my understanding, there's a lot of creditors and not enough money to cover all that so who knows how that's going to shakeup?

BRADY: No charges have been filed against Canopy executives related to the missing HSA money. Charges have been brought in a related investment fraud case. Co-founder Jeremy Blackburn is free on $1 million bail. His attorney says he won't talk to NPR. A spokesman for the U.S. attorney's office says only that the investigation is continuing.

Meantime the Nestruds are left wondering if they'll ever see their HSA money again. And they're not alone. Nearly 14,000 customers of Maryland-based Coventry Health Care also are affected. An attorney for the company says $17 million is missing. Coventry has replaced that money for its customers and will try to recover as much as it can in the bankruptcy.

This case has prompted some tough questions about HSAs. How could this money just disappear? Who was monitoring Canopy Financial? Some people are saying more government regulation is needed.

Ms. SARA HOROWITZ (Executive director, Freelancers Union): We set up a whole financial industry without the commensurate regulation.

BRADY: Sara Horowitz is executive director of the Freelancers Union. While her group didnt do business with Canopy, more than 80 of her members are asking for help.

Ms. HOROWITZ: AND what we're seeing are all these people who are being affected. And that's, I think, really what we need to talk about here.

BRADY: At the American Bankers Association, HSA advocates like Kevin McKechnie say its too soon to be talking about new regulations. He says the criminal investigation needs to wrap up first. Still, McKechnie says, a buyer beware campaign is in order.

Mr. KEVIN MCKECHNIE (Executive director, HSA Council, American Bankers Association): We think we're going to come down to a phrase that may in fact, sit on one of the disclosures or even on something more perhaps culturally relevant like, a T-shirt and it's just this: Know your trustee. If you're going to give money to somebody, who are you giving it to?

BRADY: Back in Colorado, the Nestruds say they've learned that lesson. When they sign up for their next health savings account they'll more closely examine which companies are involved. And they say they'll probably feel more comfortable going with big companies theyve heard of.

Jeff Brady, NPR News.

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