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 insurance policies have collected premiums from enrollees, but failed to pay medical providers. The consumer is 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.
How does this scam work? 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 and 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 rapidly as possible.
While claims may be paid initially, the scam operation will soon begin to delay payment and offer excuses for its failure to pay. Unsuspecting consumers who thought they were covered for their medical needs are left responsible for huge medical bills. Employers who sign up for these illegal plans may be liable for the medical bills of their employees as well.
The best way to avoid becoming a victim of insurance fraud is to know the facts, ask questions and do some research. The Better Business Bureau, along with the NAIC, offer the following tips:
For more information or to report suspected fraud, contact the Office of the Insurance Commission at 800.562.6900, your state insurance department or the BBB (www.bbb.org).