Avoid scams while shopping for insurance

If you're buying health insurance in the ACA's state exchanges, your first step should be to make sure you're shopping in the right place

It’s been nearly two years since the health insurance marketplaces (exchanges) first opened for business. Twenty million people have enrolled in ACA-compliant individual market coverage this year, including more than 12 million people who have enrolled through the exchanges. Another 14.5 million people have enrolled in Medicaid thanks in large part the the ACA’s expansion of Medicaid. And the uninsured rate is down to the single digits – the first time that’s ever happened.

But while there’s plenty to celebrate, any major change like the ACA comes with scammers who take advantage of the confusion that invariably surrounds a major policy shift. Here are some tips to keep in mind:

Scammers tap into confusion over ACA

The ACA was signed into law in 2010, and almost immediately, scammers began looking for ways to make a quick buck. Soon after the law passed, Jim Quiggle, spokesman for the Coalition Against Insurance Fraud, says he wasn’t 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 said. “With each new aspect of reform, another opportunity for fraudulent marketing opens up.”

Quiggle explained that rip-off artists go door to door and use blast faxes to convince unsuspecting customers that they’re selling “ObamaCare.” And, to create a sense of urgency, the scammers invoke 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 an “enrollment period” closes.

It’s true that the ACA requires most Americans to have health insurance, and it’s also true that there’s an open enrollment period each year, outside of which coverage can only be obtained if you have a qualifying event. But again, buyer beware. If in doubt, double check the facts with a third party to make sure you’re dealing with a legitimate source of coverage.

Marc Young, spokesman for Insurance Commissioner Kim Holland, co-chair of the National Association of Insurance Commissioners’ Anti-Fraud Task Force, explains that criminals sometimes cleverly mask themselves as insurance companies, selling plans that are completely fraudulent. “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.

Again, it’s a good idea to double check with your state’s department of insurance to make sure that the person and company you’re dealing with are both licensed to do business in your state.

Understand your state’s exchange

In addition to outright scams like identity theft, consumers need to be aware of the possibility that some agents might try to portray their agency as “the exchange” and attract customers who think they’re purchasing coverage through the official exchange. This is further complicated by the fact that licensed agents and brokers who are certified by their state’s exchange can help consumers enroll in exchange plans.

Individual policies can still be purchased outside of the exchanges. Like exchange plans, they are ACA-qualified which means they are guaranteed issue, cover the essential health benefits, and have the ACA’s limits on out-of-pocket maximums. Some are sold by carriers who also sell policies in the exchange, but some carriers only offer plans outside the exchange.

From a consumer perspective, the primary difference between exchange and non-exchange plans is the availability of subsidies. Premium subsidies and cost-sharing subsidies are only available on plans that are purchased through the exchange. Each state has just one official exchange where subsidies are available and in 38 states, it’s Healthcare.gov.

If your state is running its own exchange, you can still use Healthcare.gov to get to the exchange website in your state so that there’s no doubt you’re on the correct site. If a certified broker or agent assists you with your exchange plan application, you will still be submitting your application on the official exchange web site. If you’re submitting an application anywhere else, you’re applying for an off-exchange plan and subsidies will not be available.

Know how the law affects you, or doesn’t

Another commonly misunderstood aspect of the ACA – and one that scammers have tried to target – is that the majority of Americans do not need to obtain health insurance through the exchanges.

Most Americans haven’t had to make any changes at all under the ACA. If you already get your coverage through Medicare, Medicaid or your employer, you do not need to worry about the exchanges at all. (If you’re enrolling in Medicaid, you can do so through the exchange, and some states have switched their entire Medicaid system to run through the exchange, so check with your state Medicaid office if you have questions.)

In addition to being a portal for Medicaid enrollment, the exchanges were primarily designed to provide a shopping platform for people who purchase individual health insurance (and for small-business health plans if the employer chooses to obtain coverage through the SHOP exchange). This includes people who already had individual health insurance prior to 2014, as well as people who were previously uninsured and didn’t have access to a group plan through an employer. But almost three quarters of the population can largely ignore the exchanges.

If you’re purchasing individual health insurance, the exchanges are likely the best option if you’re eligible for subsidies. If not, you can shop both in and out of the exchange to find the policy that best fits your needs and budget. Although the exchanges’ online comparison and enrollment features have been heavily publicized, applicants can also enroll by mail or in person. You can contact your state’s department of insurance to verify that the person, agency or website you’re working with is certified with the state’s exchange.

If you’re shopping for an off-exchange plan, the department of insurance can help you make sure you’re working with a properly licensed agent and buying a legitimate health insurance policy.

Watch out for fakes and frauds

Navigators and brokers are not allowed to charge you any sort of fee for their services. The only money you need to pay is your first month’s premium (which can legitimately include carrier assessment fees to support the exchange), either when you enroll or once you get the invoice. If people are asking you for any additional fee, be wary of a scam.

Seniors who are enrolled in Medicare don’t need to do anything differently. They benefit from Obamacare, but don’t need to make any changes to their coverage and certainly don’t need to “enroll in Obamacare” or do anything with the exchanges.

Don’t “enroll” in coverage by just giving someone a few personal details.  Regulators in North Carolina are currently trying to sort out a situation whereby a licensed agent enrolled 600 homeless people in heavily subsidized health insurance plans by encouraging them to attest that their income was at least 100 percent of the federal poverty level (FPL), thereby qualifying them for premium subsidies. But it appears that some of the enrollees only provided their name and social security number, and no other details. Not to mention the fact that the coverage they received had high deductibles, and in some cases made them ineligible for community-based health programs where they had previously obtained care.

If you enroll in a health plan, you’ll need to provide relatively extensive personal information, particularly if you’re applying for premium subsidies (and if you get a premium subsidy, you have to reconcile it on your tax return). There’s no legitimate way to enroll in just a minute or two with nothing more than a name and social security number.

Discount card scams leave consumers holding the bag

Some salespeople offer discount medical cards or “buyers clubs” – some of which legitimately provide discounts on certain expenses such as 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.

Discount plans have existed since long before the ACA was written. But since they’re not considered insurance, they’re not regulated under the ACA, which means that unless a state takes steps to limit them, they can still legally be sold. They don’t provide much in the way of benefits though, particularly in the case of a large claim. And they’re also not considered minimum essential coverage, which means that if you’re relying on a discount plan instead of health insurance, you’ll be subject to the ACA’s tax penalty for not having health insurance coverage.

What has changed as a result of Obamacare is the affordability of real health insurance for people with low- and mid-range incomes. Discount plans stood out in the past because of their price, which was far cheaper than real health insurance. But because of the ACA’s premium tax credits (subsidies), the average after-subsidy premium for the 85 percent of exchange enrollees who got a subsidy in 2014 was just $82/month.

Ignore exchange naysayers

Because the individual mandate has required almost everyone to have health insurance since 2014, it’s inevitable that there have been some unscrupulous people who attempt to sell worthless “insurance.” If a policy seems too good to be true, it probably is. If in doubt, contact your state’s department of insurance before you submit an application.

Consumers should also be aware that some groups have a vested interest in fighting against Obamacare. They are often politically motivated, and aren’t above spreading outright lies about the ACA in order to turn people against it. Focus on what’s best for you and your family, and ignore people who tell you to avoid the exchanges (or even worse, to go uninsured and pay the penalty instead) without having any knowledge of your specific situation.

There is no one-size-fits-all when it comes to healthcare, which is why there are a variety of plans available in the individual market, both in and out of the exchanges.

The third open enrollment period begins this fall, running from November 1 to January 31. You’ll have three months during which you can compare plans, read the fine print, contact your state department of insurance with questions, and decide what option is best for you.

If you want your new plan to be effective January 1, you’ll need to finish your enrollment by December 15 in all but four states (Maryland, Massachusetts, Rhode Island, and Washington give enrollees a few extra days each month to get a first of the following month effective date).

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