2:25 PM
In today's fast paced world, business owners don't often have the
time to thoroughly check out the companies they rely on to provide goods
and services. In many cases, a determination of product/service quality
can be made at the time goods are delivered or services are rendered.
If goods or services do not meet expectations, there is often an
immediate remedy available. For example, poor quality goods can be
shipped back to the supplier and/or payment for services can be withheld
until services are satisfactorily rendered.
Unfortunately,
business owners do not always purchase items that are tangible items, in
the sense that they can immediately determine the quality of the goods
and/or services at the time of purchase. One example of such a purchase
is health insurance. Since health insurance is not usually used
immediately after purchase, the quality of care or the legitimacy of the
policy may not even come into play until the business owner, or a
family member, actually needs to have medical treatment. This is one of
the primary reasons that many companies, often appearing legitimate, can
get away with selling bogus health insurance coverage to unsuspecting
business owners.
In most cases, fraudulent health insurance
policies are sold to business owners by telemarketers or "agents"
through bogus Associations and Unions. In that, the buyer must join a
professional and/or trade association or become a union member to
qualify for health insurance. In fact, in a study published by the U.S.
General Accountability Office (GAO) in 2004, the GAO found that
association schemes ranked at the top of the marketing methods followed
by bogus health insurers. According to the report, "Employers and
Individuals Are Vulnerable to Unauthorized or Bogus Entities Selling
Coverage, between 2000 and 2002, the U.S. Department of Labor and state
insurance regulators identified 144 unauthorized entities selling health
insurance unlawfully. These entities defrauded 15,000 employers and
more than 200,000 policyholders out of $252 million."
However, it
is important to mention that many individual and group health insurance
products are endorsed by reputable Associations, such as the ARRP and
the American Bar Association and, many reputable Unions, such as the
AFLCIO and the Teamsters. These organizations have long been recognized
for bringing a common class of professionals or citizens together for
other purposes that have very little to do with health insurance.
Membership commonly includes a wide range of other benefits in addition
to discounted health insurance. Typically, the organizations have a
governing organization, a constitution and bylaws, a set of officers,
voting rights, regular membership meetings and a professional code of
conduct.
Unfortunately, most individuals do not find out that they
were making hefty monthly payments or premiums to fraudulent
Associations or Unions until they have a severe condition that requires
medical treatment. Usually, it isn't until after they receive treatment
that they receive notice from their medical provider that the claim that
was submitted to the insurance company was denied and that all the
medical charges that were incurred are now their responsibility.
Often,
the scheme starts when business owners are contacted by telephone or
approached by someone who claims to represent a certain, official
sounding, Association or Union. The business owner is then informed that
if s/he becomes a member of the Association or joins the Union, s/he
could qualify for a low cost group or individual health insurance plan.
Typically the Association or Union is promoted to represent
self-employed individuals and small business owners. The low cost health
insurance is usually presented as one of the many "perks" that the
business owner can qualify for, in addition to many other "member"
benefits, like discounts on other services, such as dental, eyeglasses,
office supplies, hotels, rental cars, etc.
In many instances,
these bogus companies involve licensed health insurance agents to sell
their fraudulent health insurance products. Sometimes the "agents" know
the products are fraudulent, other times, the "agent" also falls prey to
the scheme. Often, the schemes prey upon consumers who have been
previously declined insurance coverage or suffer from a pre-existing
condition. Since these consumers have very limited options to purchase
private health insurance coverage, the benefits of an Association or
Union membership that offers health insurance coverage for a "membership
fee" or "union due" is enticing. To the unsuspecting consumer that has a
pre-existing medical condition or is paying high premiums for coverage,
the "membership fee" or "union due" is a small price to pay for what
they believe will be a quality health plan that provides "guaranteed"
coverage with no "pre-existing condition exclusions" and no "waiting
periods."
In many circumstances, the print materials that are left
with the consumer are very well designed, however, the majority of the
time, the language in the "health plan brochure," if there is one, is
very unclear. The literature may name the entity that is authorized to
act as the health plan administrator of the plan, but neglect to name
the actual insurance company that is providing the health insurance
coverage. Unfortunately, it is often difficult for the consumer to
separate the illegitimate companies selling official sounding health
plans from the legitimate ones. Typically fraudulent health plans have
many commonalities.
Here are 10 "Red Flags" that may indicate health insurance fraud:
1. The "agent" is not a licensed insurance agent but an "enrollment" or "membership" coordinator.
2.
The term "discount plan" is written in the product literature, but the
term health plan, health insurance or policy is frequently used by the
plan promoter. Discount plans often provide nothing more than a discount
for medical services, such as prescription medications, eyeglasses,
dental, etc. These plans are not designed to offer major medical health
insurance coverage.
3. The official sounding "Association or Union" is one that you have never heard of before.
4.
The plan is referred to as an ERISA plan. The Employee Retirement
Income Security Act of 1974 (ERISA) is a federal law that allows
employers to set up employee benefit plans for employees and their
dependents. ERISA plans are not subject to state regulation and are not
regulated by the state insurance commissioner. ERISA plans are normally
not sold as health insurance, but are instead, established by employers,
unions or groups acting on behalf of employers. Therefore, unsuspecting
buyers believe these plans actually offer health insurance coverage,
when if fact, they do not.
5. The buyer is told that the
"membership fee or union dues" includes the health insurance premium,
but there is no mention of the word "premium" in any of the plan
literature.
6. The plan offers "guaranteed" insurance coverage with no exclusions for "pre-existing conditions" and no "waiting periods."
7. The plan is significantly cheaper in price than other health insurance plans.
8.
The term "reinsured" is used in regards to the plan. Reinsurance is
something insurance companies buy to protect themselves against their
own risks. It is insurance for insurance companies. Licensed insurers
rarely have their agents mention any of their reinsurance arrangements
during a sales presentation.
9. If the Association or Union is
comprised of members from all walks of life and/or requires its members
to state that they belong to a certain trade, class or group of
professionals that they have no affiliation with, for example, the
Association or Union is said to be comprised of "Food and Beverage"
workers, but "Florists" and "Machinists" are allowed to enroll as
members.
10. If the Association or Union is said to have a special
arrangement with a health insurance company, a plan administrator or
another third party that has designed the plan using a legal "loophole"
that allows members to purchase health insurance at a discounted rate or
to purchase a individual or group health insurance policy.
So how
can you protect yourself from falling victim to a fraudulent insurance
scam? Make sure you contact your state's department of Insurance to
determine if the health insurance company and the third-party
administrator are licensed to do business in your state and make sure
that the "agent" selling the plan is a "licensed health insurance
agent." Additionally, make sure that the health insurance company has
been approved to sell the particular policy that is being offered. Since
it may be difficult to tell if fraud is involved, always put off buying
your insurance policy until you have had the opportunity to perform
your own due diligence.
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