Consumers Urged to be Careful When Considering Medical Coverage to Avoid Getting Hurt
The costs associated with health insurance plans have soared over the past several years and so have the number of consumers bilked by insurance scams.
Dishonest operators selling phony policies have collected premiums from enrollees, but failed to pay medical providers. The victims are often left with huge medical bills and no coverage. Individuals and small-business owners who can't negotiate better rates with legitimate insurers, are often targets.
According to the National Association of Insurance Commissioners (NAIC), a typical fraudulent health insurance scam attempts to recruit as many local insurance agents as possible to market the coverage. Agents are told the coverage is regulated by federal law, not state law. In fact, this is illegal. The coverage is typically offered regardless of the applicant’s health condition, at lower rates and with better benefits than can be found from licensed insurers. The scam seeks to collect a large amount of premium as quickly as possible.
While claims may be paid initially, the scam operation will soon begin to delay payment and offer excuses for its failure to reimburse. Unsuspecting consumers who thought they were covered for their medical needs are left responsible for huge medical bills. In addition, employers who sign up for these illegal plans may be liable for their employees’ medical bills if they buy fraudulent coverage.
The best way to avoid becoming a victim of insurance fraud is to know the facts, ask questions and do some research. Connecticut Better Business Bureau, along with the NAIC, offer the following tips:
- If you are not familiar with the company offering the health plan, check them out with the Connecticut Insurance Department and your BBB. Carefully read all materials and scrutinize web sites.
- Make sure your agent is selling a state-licensed insurance product.
- If an insurance agent is trying to sell you an “ERISA” (plans governed by the federal Employee Retirement Income Security Act of 1974) or “union” plan, report it to the state insurance department. Legitimate ERISA and union plans may be exempt from state insurance regulations, which is why criminals try to trick people by making these claims. However, legitimate ERISA or plans are established by unions their members or a business for its employees, and not sold by insurance agents.
- Be suspicious if coverage seems unusually inexpensive, issued with few questions about the applicant’s health, or refers to coverage as “stop-loss insurance.” Plans that boast significantly lower-than-average rates or minimal underwriting should be a signal to look deeper.
- Deal with reputable agents. If the person trying to sell you coverage says he or she does not need a license because the coverage is “not insurance” or exempt from regulation, be cautious. Report this to the Connecticut Insurance Department.
- Ask your agent for the name of the insurer and check the benefits booklet to see whether it names a licensed insurer that is fully insuring the coverage.
For more information or to report suspected fraud, contact the Connecticut Insurance Department toll-free, at 1-800-203-3447, or your BBB, online, or by telephone at 203-269-2700.
-Submitted by Howard Schwartz Executive Communications Director Connecticut Better Business Bureau