In an ailing economy, it's common to see a jump in scams as con artists try to separate the desperate from their hard-earned money. In our current downturn, confusion over health care reform and high unemployment are providing rich ground for scammers peddling a fast-growing crop of fake health plans.
In 2009, regulators in 37 states told the nonprofit Coalition Against Insurance Fraud that, while fraud of all sorts is increasing, health insurance scams are the fastest-growing. "The increase in bogus health insurance was 'much higher' than in any other category," says a coalition report. The Federal Trade Commission also is investigating the problem.
And while sweeping health care reform was signed into law in March, there is still plenty of confusion over the effects of the legislation.
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"Health care reform is a gigantic, 2,000-page bill jammed with provisions that are phasing in over several years," says Jim Quiggle, a spokesman for the Coalition Against Insurance Fraud, which provided details for the schemes described below. Government officials and insurers haven't done a good job of telling consumers what changes to expect, Quiggle adds.
As people lose work and the health insurance coverage they had through their former employers, scammers are jumping in with an array of cheap, phony plans. These are often so cleverly marketed that it can be hard to tell you've been duped until it's too late.
2 common scams
1. Insurance policies: Con artists sell partial or comprehensive health insurance coverage and then pay little or nothing on consumer claims.The worse of these by far is fake medical insurance, says Mila Kofman, Maine's superintendent of insurance. Earlier in her career, she was a research director at the Georgetown University Health Policy Institute, where her work exposed a boom in medical insurance scams.
2. Discount cards: Consumers are lured into buying "discount programs" that appear to reduce the costs of medical coverage. The bogus programs promise -- but don't deliver -- discounts on prescription drugs, doctor's office visits, hospitalizations, dental or vision services, tests or other medical procedures.
Consumers can also be tricked into thinking they're purchasing broad coverage when all they've bought is a program that gives discounts on certain services -- and only among participating providers. Further, the provider lists dodgy discount card companies issue can be inaccurate or provide false information.
To be sure, many discount health cards are legitimate -- and scammers do what they can to blur the difference between good cards and bad. Below, you'll find tips for avoiding such traps.
The costs of getting taken
If you do find yourself the victim of a health care scam, you can be hurt in many ways -- and the financial wounds can take a long time to heal.- You could become ineligible for legitimate health insurance coverage. Insurers have strict requirements for people who are changing plans. Going without insurance for 63 days or more (after losing a job and medical benefits, for example) creates a gap in coverage, which a new insurer can use to deny benefits (such as for a pre-existing condition). You're actually uninsured if you sign up with a phony plan, and that gap could exclude you from legitimate coverage. (For more on creditable coverage, read about the Health Insurance Portability and Accountability Act.)
- You could ruin your credit. Thinking you're covered but you're not, you may visit doctors and get medical tests and procedures only to find yourself stuck with huge bills when your "insurance" pays little or nothing on the claims. Even if your bills were caused by health insurance fraud, medical providers will still expect you to pay them. If you can't (or don't) pay, the providers you owe are likely to turn to collection agencies, leading to damaged credit and possibly even garnishment of your wages.
- Your identity can be stolen. When scammers "enroll" people in fake medical plans, they often obtain individuals' Social Security numbers and other private information, opening the door to ID theft. If you're not dealing with a licensed insurance company, "it's like a domino effect," says Ed Byers, a spokesman for Medical Mutual of Ohio.
Continued: How to avoid health insurance scams
