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The setup is attractive to some insurance companies worried about losing business as employers drop coverage. Like traditional group coverage, the HRA is a mechanism for companies' money to get pumped into insurance premiums. But with individual coverage, insurers are allowed, in most states, to weed out sick people likely to rack up big bills. An industry survey in 2004 found about a quarter of people 55 to 64 get rejected for individual coverage, above the overall average of 13%.

UnitedHealth is encouraging hundreds of its independent agents to take an online course offered by Mr. Pilzer's Zane Benefits to learn how to market individual plans at companies with HRAs. Zane Benefits isn't an insurer. It earns about $10 a month per worker administering plans for companies. Workers typically buy insurance with their own money, then submit paperwork to Zane to get reimbursed with HRA money.

Sam's Club, the warehouse chain of Wal-Mart, has been selling HRA-based plans to small businesses since January 2006 in a tie-up with Extend Health Inc., a company started by Mr. Pilzer that is now part of Mr. Case's Revolution Health Group LLC. Patricc Quinn, director of travel and nonfinancial services for Sam's Club, declined to say how many employers have signed up, but he said response has been strong.

"It's a very simple model going back to individual health insurance, something that fits small businesses better than group insurance," says Mr. Quinn. "Members don't believe it. It's too good to be true."

Barnett Well Services LP in Cresson, Texas, joined the Sam's Club program in April 2006. The oil-industry trucking firm says group insurance was too expensive at $420 a month per employee. Instead, each of the 28 workers gets $100 a month of HRA money to put toward insurance premiums or, if they prefer, other medical expenses.

A former Citibank vice president, real-estate developer and professor at New York University, Mr. Pilzer says he earned his first $10 million before age 30. His books include "Other People's Money," about the savings-and-loan crisis. He now lives in the resort town of Park City, Utah, and says he has occasionally served as a rabbi at bar mitzvahs and weddings. He helped found Park City's first synagogue.

Mr. Pilzer says he became interested in pursuing health care as a business in late 1999 when his wife became pregnant with their first child. (They now have four children, ages 2 to 6.) During the pregnancy, he lost insurance he had held through a board position. When he called an agent to buy his own policy, he was surprised to find premiums for a healthy family like his were just $220 a month.

With help from some investors, he started a company to explore the insurance market. It began to take off as Internal Revenue Service rulings in 2002 and 2005 clarified that HRA money could be used to buy insurance. In October 2005, he sold a controlling stake in his company to Mr. Case's group, and started Zane Benefits the next year after a noncompete agreement expired.

Small-business owner Jennifer Morgan was captivated by an interview Mr. Pilzer gave on the Christian Broadcasting Network, during which he told host Pat Robertson about HRAs and a book he had written called "The New Health Insurance Solution."

Ms. Morgan's business, MGI Morgan General Mechanical Group Inc., which builds and services generators, pump stations and fuel tanks, has 40 full-time employees and annual revenue of nearly $9 million. The Deerfield Beach, Fla., company's group health premiums shot up 24% in 2005, and the cost of family coverage grew to nearly $1,000 a month — of which the company could cover only about $200. Ms. Morgan assigned the problem to her human-resources director — her daughter, Jessica.

After marking pages of Mr. Pilzer's book with Post-it notes, Jessica Morgan tried to set up HRAs. Several insurance agents told her it was illegal. Undeterred, she typed Mr. Pilzer's name in an Internet search late last year, found Zane Benefits and signed up for the HRA program. So far, eight employees have gone the HRA route, enabling them to get reimbursed for individual coverage. The Morgans still offer a group health plan from UnitedHealth, but may cancel it at renewal next year.

The younger Ms. Morgan, who is 28, found an individual policy from UnitedHealth's Golden Rule Insurance Co. that costs $123 a month — less than the $150 she's entitled to through the HRA. She can use the $27 a month left over for other medical expenses. "I'm making money every month on my health insurance," she says. "I'm making out like a bandit."

Randi Pendleton, a 28-year-old in accounts payable, is also pleased at her savings on an individual plan. Previously, it had nagged at her that she was paying high premiums even though she's in good health. "A lot of people in the group plan are not as healthy. Is that affecting my policy and what it costs?" Ms. Pendleton says. "That is something I've thought about."

If MGI dumps its group plan, one person who could be in a pinch is the elder Ms. Morgan, 52, whose health isn't as good as her daughter's. She was hospitalized in October 2005 with high blood pressure and now takes medication for the condition. What's more, she says someone erroneously wrote on her medical chart that she suffered from an aortic aneurysm. She has received a letter from her doctor setting the record straight, and believes she would qualify for an individual policy.

Richard Schulz, 62, manager of MGI's generator division, had three stents implanted in April 2006 after tests found blockages in his blood vessels. "Too bad for me this wasn't around 25 years ago," Mr. Schulz says of the HRA idea. "I'm not sure I would qualify now." He would face the prospect of going uninsured, except that his wife can get group coverage through her employer.

Thirty-four states have a high-risk pool for people who can't get insurance because of illness, but the premiums can be up to double the usual rate. The Florida high-risk pool has been closed to new enrollment since 1991 owing to a lack of funding.

In Texas, workers are ineligible for last-resort insurance if their employer offers an HRA. Jennifer Ahrens, associate commissioner of the state insurance department, says people with existing conditions "would be locked out of insurance completely" if a company dropped group coverage in favor of an HRA. Because of the barriers in Texas, Extend Health and Zane Benefits have stopped marketing HRA reimbursement for health insurance there.

Mr. Pilzer acknowledges there are holes in the government safety net, but he accuses Texas regulators of making matters worse by trying to shield higher-priced group policies from competition. The state's rules are "total price protection for brokers selling group insurance," he says. "It's a joke."