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Don't fall prey to health insurance fraud

Consumer lawyer and "Today" contributor Alan Kopit gives advice on how to protect yourself.
/ Source: TODAY

Each year thousands of people become victims and a high percentage are seniors. According to research done at Georgetown University, four of the biggest unauthorized insurers have left at least 100,000 victims with $85 million in unpaid medical bills. To help detect these scams before you become a victim, consumer lawyer and “Today” contributor Alan Kopit shares advice on how to protect yourself.

What if you are 65 years old and needed immediate surgery? While Medicare might cover some bills, it may not pay for everything. But you think you are prepared because you bought supplemental health insurance to cover just this situation. Yet when you try for weeks to get authorization from your insurance company, you can’t get anyone on the phone. Then, you learn the awful truth, the health insurance you bought was a sham and you have no coverage.Unfortunately, thousands of people are victims of health insurance fraud — a high percentage of them seniors. According to research at Georgetown University, just four of the biggest unauthorized insurers have left at least 100,000 victims with $85 million in unpaid medical bills.  This article will help you detect fraud before you become a victim.

Beware of Health Insurance Scams
Health insurance scams work as follows: “Insurance agents” sign up as many people as possible, and keep them paying premiums for as long as possible. Some small medical claims get paid, but when claims get substantial or regulators catch on, these “offices” close up and move out of town. 

In the past schemes have tended to be localized, involving relatively small numbers of people.  Now, however, the con men have gone national, and in a matter of months, they can enroll and bilk hundreds of thousands of victims out of large sums from all over the country. This scam is of particular concern to new retirees and the elderly, who are without access to group health plans, and who face premiums that have increased much faster than inflation. Experts say that health insurance scams tend to proliferate when the price of legitimate insurance spikes. 

In most schemes, these phony companies pay modest claims for several months, which is a must to avoid early detection of the scam. These scams may also recruit legitimate insurance agents to market health insurance to as many people as possible. Legitimate agents, with large blocks of clients, may give the scam a “façade of legitimacy.” Well-meaning agents may sell the phony policies without even knowing that they are selling worthless insurance. 

Too Late To Buy Other Insurance
People often don’t find out that they are a victim of fraud until a serious medical condition requires them to go the insurance company for approval of treatment. For example, a victim may need a complex cancer treatment or surgery for rapidly deteriorating eyesight immediately, but they can’t get the approval. Once the fraud is discovered and the insurance company has left town, the victim is left with seeking other insurance, but they cannot get new insurance because of their pre-existing medical conditions. As a last resort, people may have to pay for the treatment themselves, but often after significant delays that could very well impair their ability to recover. Worse yet, they may not have the treatment at all because payment cannot be assured.

We Are All Hurt By Insurance Scams
Obviously the victims are hurt because they remain responsible for their unpaid medical bills.  They also may lose access to healthcare altogether as a result of this scam.  But employers who purchase fraudulent health insurance, may also find themselves liable for unpaid medical bills.  In addition, medical professionals and healthcare facilities may never get paid for expensive treatments when it is discovered that there is no insurance to cover it. There are instances where the fraud is so great that entire institutions have gone bankrupt as a result.  Of course, the rest of us are hurt as well because consumers will ultimately pay for the fraud through higher healthcare costs and higher health insurance premiums. 

Don’t Become a Victim of Health Insurance Fraud
Here are some tips so you won’t become a victim of health insurance fraud:

Check out the health insurers carefully
Contact your state insurance department, determine whether the insurance company is licensed, and see whether any complaints or problems have been reported. If the company tells you it does not have to be licensed or is exempt from state regulation, don’t do business with that company. 

Deal with reputable agents
Get references from clients of the agent and check their reputation with other insurance agents that you know. If the person trying to sell you coverage says he or she doesn’t need a license from your state, watch out. Contact your State insurance department immediately if you have any questions. 

Beware of low rates and minimal underwriting
If the health plan will accept almost anyone, including those with pre-existing or serious illnesses, you may be dealing with a fraudulent insurance company. Also remember not to jump at a deal simply because rates are extremely low. Be suspicious if the company requests that you pay for premiums in cash, pay a year’s premium in advance, pressures you to buy immediately because “it’s your last chance,” or requests that you sign a blank insurance form.

Watch out for confusing names
Be careful if a company uses a name that suggests it is connected with the federal government, Medicare, or some other well-known company. Unscrupulous companies often choose titles, business addresses and stationary styles that purposely mislead you into thinking you are purchasing something of value from the government or from a respectable company.

Ask for advice
Discuss the offer with a knowledgeable friend, relative or with an accountant, attorney, trusted advisor or even other insurance agents to see whether they have heard of the company or the insurance agent you are dealing with. Don’t be afraid to get information in writing and take your time when making your decision. 

Help Is Available
There are several fine organizations that can help:

National Association of Insurance Commissioners 2301 McGee Street, Suite 800
Kansas City, Missouri 64108
Phone:  (816) 842-3600

Coalition Against Insurance Fraud1012 14th Street, NW, Suite 200
Washington, D.C. 20005

Georgetown University Health Policy Institute

U.S. Department of Labor

You can also contact your state insurance department or state attorney general’s office.

Alan Kopit is a consumer attorney with the firm Hahn Loeser and Parks LLP in Cleveland, Ohio and a regular contributor to “Today.”