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 US.

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

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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 2014.

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 confirm.”

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 time.

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 deals.

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 all.

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 promptly.

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 true.

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 premiums.

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.