There's a reason
perps pick on the little guy. Self employed individuals and
small-business-sponsored health insurance is governed by state
regulations, not federal, which are offer greater consumer protection.
(The feds keep an eye on the large-group insurance market).
In many states, health insurers can deny self employed
individuals with pre-existing medical conditions. And if they do offer
coverage, it comes at steep rates. As for small businesses, many can't
afford to offer much in the way of health insurance benefits. Just 45%
of companies with three to nine workers offer them, according to the
2007 annual survey from the Kaiser Family Foundation; overall, some 60%
of companies now offer health insurance benefits, down from 69% in 2000.
Meanwhile, the total number of uninsured Americans clocks in at roughly
47 million, or 16% of the U.S. population.
Choking health insurance costs have self employed ndividuals and entrepreneurs desperately scrambling for any relief--even
into the waiting arms of scammers.
"Anytime you have an health insurance need that is not
met by the industry, it provides an arena for crooks to get involved,"
says Robert Brace, partner at Hollister & Brace, a Santa Barbara,
Calif.-based law firm, who represented prosecutors against Employers
Mutual, an unauthorized health-insurance company that defrauded
thousands of health insurance policy holders out of $30 million in
unpaid claims. Last February, James Graf, architect of the scam, was
sentenced to 25 years in prison and ordered to pay $20 million in
restitution.
The Employers Mutual debacle (and others) led to a
crackdown on fraudsters. State insurance departments launched
consumer-awareness campaigns. This paid off for awhile, but now the bad
guys are back. One big reason: "It's really easy to do," says Brace. "I
could sell phony insurance."
Sham insurers can take many forms, including phony
associations (think the Scuba Divers Association of Nebraska) or even
third-party human-resource administrators. Some look and sound very
legitimate, with real offices and Web sites, says Brace. They go fishing
with below-market rates and target buyers who don't qualify for regular
health insurance . Some hucksters might even pay a few claims to build
trust. Eventually, though, they cut and run.
Herewith, some common scams and how to beat them:
Dreaded Disease Policies
In this time-worn scheme, an insurance provider claims
to offer coverage for medical expenses related directly to a so-called
"dreaded" disease like cancer, heart attacks, strokes or just an
unfortunate accident. But when the bills come, the sham company is long
gone with your premiums in its pocket.
There are some legitimate versions of these policies,
too, but they come with plenty of loopholes. Limitations include: time
frames with no option to renew, fixed dollar amounts and quirky caps on
care. (Examples: Cancer treatments may only be covered in an in-patient
setting, or the policy may provide no coverage for other illnesses
related to a disease.)
Bottom line: With the right health insurance , you
don't need these policies. If you don't have health insurance and want
to take a flier, make sure both agent and insurer are licensed in your
state. Check with your state's insurance department.
Discount Cards
The promise of 15% off doctors' visits and hospital
stays may sound like a bargain, but often these offers aren't
real--unlike the crooks that market them. Some legitimate insurers offer
discounts for "up to" a certain percentage, when in fact most of the
time the savings are far more modest. These savings may also apply only
to very specific treatments.
"In the last several years, there's been lots of
activity in the discount card area," says Mila Kofman, assistant
research professor at Georgetown University's Health Policy Institute
and the author of several studies on health insurance fraud.
To sniff these scams out, vet the list of providers
and find out if those doctors indeed honor discounts. Double-check the
prices. Also check with your state's insurance department to see if
there have been any past complaints with regard to those discounts.
Stacked Policies
Imagine a bunch of "dreaded disease" policies piled on
top of each other. At best, the policies are mis-marketed; at worst, the
health insurer is a fraud.
Swiss cheese has nothing on some of these policies,
though they may not be fraudulent per se. Exceptions abound, and you may
end up paying higher premiums while missing out on basic coverage. Call
your state regulator and read the fine print before getting suckered.
Actually, don't bother--just avoid these plans altogether.
Faith-Based Plans
These programs collect attractively priced monthly
premiums from members of a local or national congregation. (Most require
members to uphold certain standards, such as no smoking, alcohol or
premarital sex.) While plan members take it on faith that their medical
bills will be covered, many won't be. Worse, there is little recourse to
extract the money because programs tend not to be regulated.
Given the lack of transparency, it's hard to know
which faith based plans are legit and which aren't. Still, check with
your state insurance department to see if consumers have filed
complaints. Sometimes financial statements are available to the
congregation, and some programs may even have a board of directors you
can investigate.
Sadly, battling health insurance scammers is a lot
like trying to plug holes in a dike. But that doesn't mean you have to
make it easy on them. "The bottom line is that
health insurance
is
expensive for a reason, mostly because medical care is expensive," says Kofman. "health insurance isn't going to be a lot cheaper depending on
how you sell it."
In other words, if it smells too good to be true, it
probably is.
