Health insurance scams Author:    Posted under: Health InsuranceHealth Insurance questions answered


Health insurance scams

The recent economic downturn, rising unemployment rates and skyrocketing health coverage premiums have set the stage for unscrupulous individuals and companies. They prey on the helpless, despairing, ‘pushed-to-the-limit’ populace and the results are depressing at the least and catastrophic in the extreme for others.

Add to that, since the approval of health care reform bill, bogus health insurance companies have sprouted left and right luring desperate individuals and small business owners with advertisements and marketing campaigns that seem too good to be true. And most of the time, they are.

The General Accounting Office has issued a report that from 2000 to 2002, there were 144 unauthorized entities that swindled at least 15,000 enrolled employers and more than 200,000 policyholders of over $200 million worth of unpaid claims.*

How do they work?

In some cases, these bogus health insurance policies are sold to individuals or small business owners through telemarketers or agents. They entice the unsuspecting consumer to join a certain association, or to become a union member so that they will qualify for health insurance.  Their membership will gain them access to discounts on various other services and products and cap the offer with the biggest perk of all, which is low cost group health insurance in exchange for a small membership fee or union dues.

On the other hand, there are also fake health insurance companies who boldly use TV and Internet ads, flashy websites and even door-to-door salespersons to peddle their phony policies. In an April 2010 letter to state officials, Kathleen Sebelius, Secretary of Health and Human  Services, warned them to be on the alert for scammers urging consumers to obtain coverage during a non-existent ‘limited enrollment period’ that they falsely claim was made possible by the new legislation.**

While you must be on the lookout for companies that you’ve never heard of before, you must also be careful of those whose names sound too much like a known and legitimate competitor.

Also, while some bogus insurance companies employ non-licensed insurance agents calling themselves ‘enrollment’ or ‘membership coordinators’, there are others who do use licensed insurance agents who may or may not know that they are selling phony insurance policies.

What happens if I purchase bogus health insurance coverage?

The financial repercussions are tremendous. You will be forced to pay most, if not all of your medical bills out of your own pocket. For a person who has life savings, this would mean depleting what you have saved up for you and your family’s future, leading to financial ruin. For those without money saved in the bank, it will result in getting even deeper in debt.

Additionally, your health may suffer greatly after falling victim to a scam as you scramble to look for and obtain health coverage from a legitimate health insurance company, as this will delay the medical attention and treatment you might need.

Red flags to alert you to possible health insurance company scam:

  • The premiums are significantly cheaper than other competitor’s rates.
  • The health plan promises to provide guaranteed coverage with no exclusions for pre-existing conditions and no waiting periods.
  • The salesperson uses scare tactics such as that the health insurance policy is only available at a specially discounted rate for a limited amount of time and that it is a requirement for the new federal health care laws.
  • The sales rep seems to be evasive or cannot provide you with the appropriate answers to your questions. Details of the actual policy will be sketchy at best and they will deflect your questions with statements such as “everything you need to know is n the brochure”.
  • The product brochure itself gives very vague information, may name the entity that is authorized to act as administrator health plan but overlook naming the actual health insurance company providing the health insurance coverage.
  • You are required to join an association to qualify for the health care coverage.
  • They refer to their plan as an ERISA plan. The Employee Retirement Income Security Act of 1974 is a federal law that permits employers to arrange benefit plans for employees and their dependents. ERISA plans are not subject to state regulation and are not regulated by the state insurance commissioner. However, ERISA plans are not usually sold as health insurance. Instead, they are established by employers or by unions and groups acting on their behalf.
  • In the event that you did purchase health coverage from them, these fake insurance companies would not promptly be able to provide you with a copy of your policy, if they provide you with it at all.
  • The hospital or doctor’s office may complain that the plan hasn’t been paying your medical bills and the health plan keeps telling you that the delays are mere accounting glitches. Most of the time, you are unable to talk to anyone from the health plan administrator at all.

What can I do to protect myself from scammers?

  • Always do background checks on the insurance companies. Check if they are licensed to conduct business in the state you live. You may contact your state’s department of insurance, or visit the website for the National Association of Insurance Commissioners (http://www.naic.org/state_web_map.htm) for detailed information and access to commissioners in all 50 states.
  • Avoid signing up quickly, no matter how good the deal seems.
  • Avoid signing up without seeing the policy first.
  • Don’t give out your bank account and credit card number and information to anyone or any Internet site without thoroughly checking out the company’s legitimacy.

What do I do when I spot a scammer?

Upon careful examination and you think the company you are dealing with is fraudulent, contact your state’s insurance department and alert them of the activity right away. If you can, provide them with as much documentation from the bogus health plan.

Sources:
* http://www.gao.gov/new.items/d04512t.pdf
** http://www.hhs.gov/news/press/2010pres/04/insurance20100406.pdf

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