Health insurance scams

It’s ‘buyer beware’ as scam artists use reform legislation to prey on confusion of health insurance consumers.

While millions of Americans are anxiously waiting for the various provisions of this year’s landmark health reform legislation to be enacted, they should also be on the lookout for criminals who haven’t hesitated at all to use the legislation as a way to take advantage of consumers.

In the months since President Barack Obama passed the Patient Protection and Affordable Care Act, law enforcement and state insurance departments have begun investigating a host of reports about criminal schemes to capitalize on the reforms.

Health and Human Services Secretary Katherine Sebelius has already issued warnings to state attorneys general to be on the lookout for scams that “may be using passage of these historic reforms as an opportunity to confuse and defraud the public.” And in Nevada, an insurance trade organization is running ads to make consumers aware of the scams and rip-off artists.

“Passage of the legislation designed to protect consumers ironically has given criminals ideas for schemes to swindle uninformed consumers,” says Charles Smith Dewey, founder of healthinsurance.org. “Now, more than ever, it’s ‘buyer beware.’”

insurance schemes exploit legislation’s provisions

Jim Quiggle, spokesman for the Coalition Against Insurance Fraud, says he’s not surprised by the sudden influx of health insurance scams. “Crooks are exploiting the mass confusion over what the health reform means to the average consumer,” Quiggle says. “With each new aspect of reform, another opportunity for fraudulent marketing opens up.”

Quiggle says rip-off artists are going door to door and blast faxing with fake insurance policies and telling unsuspecting customers that they’re selling “ObamaCare.” And, to create a sense of urgency, the scammers are invoking the legislation’s individual mandate provision, telling potential scam victims that the law requires them to buy the insurance they’re selling and do it before a supposed enrollment period closes.

It’s just one of many criminal tactics being used, according to Marc Young, spokesman for Insurance Commissioner Kim Holland, co-chair of the National Association of Insurance Commissioners’ Anti-Fraud Task Force, who says scam artists have been preying on unsuspecting Americans since the beginning of the current economic downturn.

“Now that the legislation has passed, marketers are going door to door, using the phone, and sending blast faxes,” Young says.

Some plans being offered are a complete fraud by criminals who cleverly mask themselves as insurance companies. “Unfortunately, the criminals provide all of the materials that legitimate companies provide,” Young says. “They’ll use the industry language to describe levels of coverage. They’ll issue authentic looking insurance cards.”

Some companies will even set up storefronts in communities, selling policies and sticking around just long enough to file bogus claims – only to completely vanish into thin air overnight. These companies are “very deceptive, very misleading, with very professional looking materials,” Young says.

discount card scams leave consumers holding the bag

Other individuals offer discount medical cards or “buyers clubs” – some of which legitimately provide discounts on some expenses such prescription drug costs and dental services through a network of providers. In some cases, however, unscrupulous marketers are overstating the size of those networks, or offering unbelievable discounts – “sometimes up to 85 percent off,” Quiggle says.

And, in some cases, consumers are being drawn into those plans on the false promise that the discount card programs will pay for major medical expenses. “We see cases where people are showing up at hospitals presenting their discount card because they think they have health insurance, only to be told they’ll have to pay for services out of pocket,” Quiggle says.

In other cases, consumers incur large medical expenses, then find out that “pre-authorized surgeries” or other large expenses won’t be reimbursed.

“They’ll be told that the check is in the mail,” says Young, “or they’ll be told that they’ve been denied payment because the company found a pre-existing condition in their history.”

defending yourself against insurance fraud

So how can individuals protect themselves from fraud while seeking individual health insurance? Consumers can take several common-sense defensive measures.

• Trust your gut. For starters, Young says, individuals need to remember the familiar admonition that “if it sounds too good to be true, it probably is.” If a plan is providing extensive coverage for just “pennies a day,” beware.
• Look for suspicious signs. A common persuasion tactic is to use an image of someone official to lend legitimacy to a plan. “I’ve never seen a president used by companies to market products more than with President Obama,” Young says. If the plan is called “ObamaCare,” it’s definitely not endorsed by the U.S. government, Quiggle says. (Also, beware of marketers who tell you their plan is approved by the government. Until insurance exchanges take effect in 2014, the government will not approve any insurer’s plan.)
• Stop. Call. Confirm. First, ask the marketers to provide proof that they’re licensed by the government. Then, verify their information. “Consumers need to stop before they purchase a plan and make a quick call to their state insurance department to confirm that the plan provider is actually licensed to do business in their state,” Young says.
• Take your time. Don’t bend to pressure from a marketer who presses you with a “limited-time offer” that claims time is running out for enrollment, Quiggle says, and definitely don’t provide bank account or credit card information until you’ve checked out the policy thoroughly.
• Compare. State departments of insurance can also give consumers a look at the complaints against plan providers, so they can compare not just on price, but on coverage. Consumers can also look to reputable online Web sites to compare policies and prices to get a sense of what comparable coverage might cost.
• Always read the fine print. “The bottom line is that no matter where you’re buying coverage – whether it’s an unfamiliar company or a well-respected carrier – you need to read your policy,” says Smith-Dewey. “It’s absolutely critical that health insurance consumers know exactly what they’re buying. Their health and their lives depend on it.”