10 Warning Signs Of A Health Insurance Scam

After new legislation, bogus policies sold door-to-door and via email and phone, cost victims millions: Internet Scambusters #390

Health insurance scam artists rolled into action as
soon as the new US medical cover legislation was signed
into law.

Selling bogus health insurance plans and gathering
personal information for non-existent health ID cards,
the crooks have netted millions of dollars across the

We have the latest information on the scams, plus
advice from insurance industry experts on how to spot

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Let’s check out today’s…

10 Warning Signs Of A Health Insurance Scam

Within just days of the new Patient Protection and
Affordable Care Act passing into law, a health
insurance scam flooded into almost every US state,
raking in millions of dollars for worthless policies.

The new health insurance law eventually will require
everyone to have medical cover. But that’s not till

And even limited changes providing earlier options for
people with pre-existing health conditions don’t come
into force until September this year.

But that didn’t stop crooks from offering bogus health
insurance plans — by phone (including toll-free
lines), email and door-to-door.

In some cases, they really sell discount cards or
limited-benefit plans, which are legal. But the scammer
doesn’t explain the very limited benefits, or may
overcharge for premiums.

Other times they have nothing to sell but a fake health
insurance plan that may look real but have no value.

In both cases, victims usually don’t find out until
they make a claim.

Sometimes, the health insurance scam artists even claim
to be federal agents collecting information for a new
identity card system that they falsely say will be part
of the new program. This is merely a phishing attempt
for identity theft.

They use high pressure sales techniques and may claim
victims have to sign up before a looming deadline.

All of this is totally untrue.

“Scams based on current events are nothing new,” says
John Huff, director of the Missouri state insurance
department. “We’ve seen it with everything from H1N1 to
federal stimulus money to health care reform. Consumers
should not be fooled and should stop, call and

In a published alert, the National Association of
Insurance Commissioners (NAIC) and Consumer Reports
magazine advised the public to be wary of salespeople
who say the health coverage they’re peddling is
required by law, don’t explain the coverage or benefits
fully, or say the premium is good only for a limited

They also may claim that coverage will be exempt from
changes under the new law. In reality, only policies
bought before President Obama signed the legislation
are exempt from changes required by the law.

The NAIC website has a full list of frequently asked
questions about the health care reform.

10 warning signs

Meanwhile, the Coalition Against Insurance Fraud lists
10 warning signs that what’s on offer may turn out to
be a health insurance scam:

1. You receive a persistent barrage of phone and email
messages or see flyers offering incredibly low-priced

2. You’re pressured to “sign up now” because the deal
won’t last. The sales rep may even demand your personal
financial details before a “policy” can be issued.

3. The scammer claims to be working for a government
agency or working on an officially-sanctioned program.
They may even use a term like “Obamacare” to describe
the service they work for. There’s no such thing as
“Obamacare.” Even in 2014, the government does not plan
to operate in this way.

4. The terms of the insurance are just “too good to be
true.” This is always a big scam giveaway. If it’s
cheap, you’re almost certainly not going to get the
coverage you might want or expect — if anything at

5. The sales rep is cagey or evasive about the details
of the policy, perhaps avoiding answering your
questions and claiming the information you need is in
the brochure. They may even decline to show you an
actual policy.

6. They say you must join an “association” or “union”
to get the coverage you need. These organizations may
not even exist or may not be relevant to your
interests, but the use of the name seems to make the
deal seem more credible.

7. They use official-looking or well-designed websites
to give them the appearance of respectability and
honesty. You may be encouraged to sign up online but,
again, the policy details will be sketchy.

8. Your supposed insurance card or policy just doesn’t
turn up. If it’s genuine, you should expect to see it

9. Similarly, the “insurer” fails to pay your medical
bills promptly. When you inquire or complain, the
company blames accounting errors or other delays.

10. The rep contends that the policy is exempt from the
need for state licensing because it comes under the
provisions of a special federal law, such as ERISA
(Employee Retirement Income Security Act). This is not

These health insurance scams now operate in most
states, says the coalition, “exploiting a perfect storm
of vulnerability”: millions of Americans without health
insurance, mounting job layoffs, and rising health

If you are interested in or concerned about health
insurance plans, you should talk to a reputable agent.

Be sure to check that the agent is licensed and the
policy and insurance company are legitimate. Do this
via your state insurance department. Find a map and contact details for each state on the NAIC site.

With almost four years before the part of the new law
requiring health insurance comes into force, the crooks
have plenty of time to refine and spread their health
insurance scam and target new victims — make sure
you’re not one of them.

That’s all for today — we’ll see you next week.