Scam Alerts

Health-Insurance Scams

by M.P. McQueen

Wednesday, November 21, 2007

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Small employers and individuals searching for affordable health insurance increasingly are falling victim to scams and misleading offers.

More than 200,000 businesses and individuals in the U.S. have purchased phony insurance since the decade began, and victims have been left with hundreds of millions in unpaid medical claims, according to Mila Kofman, an associate professor at Georgetown University who has studied the issue.

The bogus insurers collect premiums, but they don't pay claims.

Targeting seniors

In the newest twist, telemarketers are selling fake Medicare prescription-drug plans and Medicare Advantage policies to seniors, says Kim Holland, insurance commissioner of Oklahoma. Some fraudulent telemarketers are also using the calls as a pretext to glean confidential information for identity theft, she says.

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Meanwhile, phony group policies for small companies and their workers are often pitched through unsolicited faxes. In Arizona last month, the state insurance regulator ordered the National Trade Business Alliance of America to stop selling or offering insurance to Arizona residents. The state charged that the unlicensed operator was offering bogus policies to small businesses and their employees for premiums of $173 a month for a family.

The Arizona regulator says the group also may have operated under nine other business names.

Insurance departments in North Carolina, Kentucky and Pennsylvania had previously targeted some of these entities for similar activities, according to the Arizona insurance department and other sources.

Bogdan Rentea, an attorney for the NTBAA and affiliated companies said they deny the allegations and "have asked for a hearing before the insurance commissioner in Arizona to answer them." He noted that a similar hearing was held in North Carolina and they are awaiting the results.

Dubious discounts

Another problem involves the sale of medical discount cards. The programs are sometimes misrepresented as insurance by unscrupulous agents and Web sites.

Legitimate discount programs offer discounts of 5% to 25% or more on medical services from a list of in-network providers; you are still responsible for paying the bills. Some illegitimate programs don't have many providers in their networks, or don't deliver the promised discounts. Some states, but not all, require licensing or registration of medical discount card providers.

Experts advise people seeking to buy health insurance to "stop, call and confirm" the license of the agent and the company with their state insurance department. For links to the state departments, go to naic.org, the Web site of the National Association of Insurance Commissioners. Its home page also has information on various types of health insurance plans and how to choose one.

Ms. Holland, the Oklahoma regulator, urges consumers who feel they've been sold or offered phony insurance to call their insurance department and file a report.

"It is amazing how long these things can go on before regulators are advised of them. Until people complain, we don't know," she says.