The worse the economy gets, the more con artists rise to the surface with schemes to trick you out of your hard-earned money, including a fast-growing crop of fake health insurance plans.
And confusion over health care reform produces an environment ripe with scams. There’s good reason for confusion: “Health care reform is a gigantic 2,000-page bill jammed with provisions that are phasing in over several years,” says Jim Quiggle, spokesperson for the nonprofit Coalition Against Insurance Fraud, which provided details for the schemes described below. Government and insurers haven’t done a good job of telling consumers what changes to expect, he adds. (See this health care reform timeline.)
As people have lost work and health insurance coverage, scammers are jumping in with an array of cheap, phony plans so cleverly marketed that it’s hard to tell you’ve been duped until it’s too late.
Some even go door to door selling “products” and telling people, “We know you’re confused about the changes, we’re here to help.”
Last year, regulators in 37 states told the non-profit Coalition Against Insurance Fraud that while fraud of all sorts is increasing, health insurance scams are the fastest-growing. “The increase in bogus health insurance was ‘much higher’ than in any other category,” says a coalition report. The Federal Trade Commission also is investigating the problem.
These two schemes are the most common:
Phony medical discount cards: Consumers are lured into buying “discount programs” that appear to be full medical coverage and promise — but don’t deliver — discounts on doctor’s office visits, hospitalizations, dental work, prescription drugs, tests and medical procedures.
Fake medical insurance: Con artists sell partial or comprehensive health insurance coverage and then pay little or nothing on consumers’ claims.
The worst by far are fake medical insurance plans, says Mila Kofman, Maine’s Superintendent of Insurance. Earlier in her career, she was a research director at Georgetown University Health Policy Institute, where her work exposed a boom in medical insurance scams.
Health care reform should eventually lead to bona fide access to affordable health insurance, but those changes will happen over several years, Kofman says. Meanwhile, annual increases in health insurance premiums are driving people into the arms of scammers.
A fake medical plan will exacerbate your financial problems. Here’s how:
- You think you’re covered but you’re not.
- You visit doctors and get medical tests and surgeries only to find yourself stuck with disastrous bills when your “insurance” pays little or nothing on the claims.
- You could ruin your credit. When you can’t pay your bills, even if it’s due to health insurance fraud, medical providers will seek their payment and are likely to use collection agencies, leading to damaged credit and possibly even garnishing your wages.
- You become ineligible for legitimate health insurance coverage: Insurers have strict requirements for people who are changing plans. Going without insurance for 63 days or more (after losing a job and medical benefits, for example) creates a “gap” in coverage, which a new insurer can use to deny benefits (for a pre-existing conditions, for example). You’re actually uninsured if you sign up with a phony plan, and that gap could exclude you from legitimate coverage. Read about the HIPAA law for more information on creditable coverage.
- When scammers “enroll” people in fake medical plans, they may obtain individuals’ Social Security numbers and other private information, opening the door to identity theft. If you’re not dealing with a licensed insurance company, “It’s like a domino effect,” says Ed Byers, spokesperson for Medical Mutual of Ohio.
Discount cards, too, are a source of great confusion. Some are legitimate. Many are not. It’s hard to tell the difference. Also, some discount-card companies let customers believe they’re buying health insurance when, really, they’ve only bought a program that gives discounts on certain services — and only among participating providers. And some have inaccurate provider lists.
Tips for avoiding health insurance scams
These scofflaws can be skillful and convincing; they try to reel you in by pretending to work for big, trusted insurance companies. Here’s how to protect yourself.
- Check the Coalition Against Insurance Fraud’s watchlist of health plans to avoid. Even if a company is not on the list, be wary.
- Get the Web site and phone number for any company you’re thinking of doing business with. Investigate the company.
- Get the list of providers who participate in a company’s plan and call them to ask if they’re really part of this plan; ask which of services are eligible for the discounts or coverage. Avoid any company that won’t give you a provider list.
- Read the entire policy, including the fine print, along with a trusted friend or family member. (You should be able to get your enrollment fee refunded if you cancel within 30 days.) Avoid any company that won’t give you a copy of the policy they’re selling.
- Do not respond to plans offered through faxes from strangers, e-mails, telemarketers or door-to-door salespeople.
- Call your state’s insurance department to check the license of every company and insurance agent you deal with. Investigate them also through your state’s consumer protection office and attorney general’s office.
- Get salespeople to explain all costs, including enrollment fees, monthly charges, deductibles, coverage maximums and any other expenses. Calculate exactly how a plan would affect your out-of-pocket costs so you don’t end up spending more than you save.
- Don’t buy anything you don’t understand. Avoid aggressive sales people or those who make you feel dumb.
- Beware of “guaranteed coverage,” or promises of a specified percentage of savings (“30% off!”) and of pressure to close a deal fast because “time is running out!”
- Be suspicious of large upfront costs. Compare costs among several health insurance plans. Genuine health insurance, unfortunately, is expensive, says Quiggle. If you’re offered something that sounds too good to be true, it probably is.
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