In the wake of sweeping health care reform, consumers will need to be wary of con artists promoting fraudulent plans and benefits. State regulators are already struggling to stop fraudulent health insurance plans, a growing problem that has cheated tens of thousands of consumers at a cost of tens of millions of dollars, according to Sean P. Carr, Washington Correspondent in an article published March 23, 2010, by InsuranceNewsNet.com.
According to the article:
Fraudulent plans continue to grow in size and scope. "There's no end in sight," said James Quiggle, communications director for the Coalition Against Insurance Fraud. A common scam involves plans that promise full health care coverage but deliver worthless policies or lesser products designed to look like comprehensive coverage, said Quiggle, who has studied the issue for years. Consumers may purchase "limited benefit" plans or medical discount cards that often present themselves as providing full insurance coverage -- until the bills come, he said. Such fraudulent plans surged in the early 2000s, Quiggle said. When confronted, companies sometimes claimed they were not subject to state insurance regulation...Regulators knocked many of them out of business in the mid-2000s, he said, but the combined effects of recession, sustained joblessness and increasing numbers of uninsured provided a target-rich environment for their return. The number of people victimized are in the tens of thousands, he said.
Companies that sell these plans tend to operate under many different names, adding or changing new ones frequently, said Oklahoma Insurance Commissioner Kim Holland. The secretary-treasurer of the National Association of Insurance Commissioners has kept tabs on these companies through NAIC entities including an anti-fraud task force and attorneys round table. Oklahoma is one of many states to take action against American Trade Association of Springfield, Tenn., related entities and their executives. In November 2009, it issued a raft of cease and desist orders that carry civil penalties of $25,000 for each violation. Last month, Florida took similar action against American Trade Association Inc., Beema-Pakistan Co. Ltd., Serve America Assurance Ltd., Real Benefits Association, Affinity Group Benefits Association Inc., Smart Data Solutions LLC., SDS Management Group (BestWire, Feb. 19, 2010). Kansas cited many of the same companies and individuals the same month. Regulators said the companies were delivering unsolicited blast faxes, e-mails and other communications that advertised inexpensive health insurance coverage. However, they said, the issued policies were for unauthorized limited benefit plans. Holland said ATA has received at least $14 million in policies from 12,000 members. "It's just a front for taking people's money and not paying claims," she said. Four days after Holland issued her order, ATA President Obed Kirkpatrick announced new health insurance products, including a "mini-medical plan." American Trade Association representatives referred calls to Kirkpatrick to attorney William Hendricks, who did not respond to a message seeking comment.
Companies engaged in selling fraudulent health plans create "octopus-like structures with many affiliates, often with no working phone numbers," Quiggle said. The goal is to confuse and deceive regulators "with an impenetrable network that's hard to unravel.""It's a complicated dynamic. You have a downstream sales model with a lot of intermediaries," said Steve Nachman, deputy superintendent for frauds and consumer services for the New York State Insurance Department.In August 2009, New York regulators fined American Medical and Life Insurance Co. $700,000 for violations including a nationwide television commercial that "made grossly exaggerated promises" (BestWire, Aug. 14, 2009). AMLI blamed a marketing entity formerly used by the company and agreed to discontinue its limited medical benefit group policies in New York, among other steps.Shutting down bad actors is hard, Holland said. There is only so much regulators can do, she said, which is why they are cooperating with state and federal prosecutors who are conducting investigations."If they were worried about a cease and desist order, we wouldn't need to issue one," Holland said.
The best strategy against fake insurance plans is consumer awareness, Quiggle and Holland said. The NAIC's "Stop. Call. Confirm." campaign -- which offers a special phone line for consumers to verify whether plans are legitimate insurance -- is helpful, but stronger nationally coordinated efforts are needed, Quiggle said."The few minutes it takes to make a phone call can save tens of thousands of dollars," Holland said.
These con artists will most certainly take advantage of heightened expectations following passage of the law. Uninsured supporters of the bill have reportedly likened the bill, and its promised reforms to "Christmas," and are reportedly anxious for the opportunity to buy affordable insurance. Unfortunately, if these con artists reach consumers first, they are not likely to receive affordable insurance as promised. The combination of euphoric consumers expecting discount insurance and scam artists willing to provide the illusion of same is a prescription for disaster, and this prescription is certain to have some nasty side effects. Be careful, shop from reputable agents, and compare and contrast carefully. Take the NAIC's advice: "Stop. Call. Confirm."
Sean P. Carr's excellent article can be found in its entirety here.
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