Health Insurance Scam Warnings

Health Insurance Scam Alerts

The Texas Department of Insurance (TDI) has recently issued a warning to PPO organizations about unauthorized insurers soliciting businesses. What really concerns me about this warning, is that compared to the average consumer, I would expect a preferred provider organization to be sophisticated enough to determine if an insurer is real or bogus. The TDI recounts a study by the US General Accountability Office that over 200,000 policy holders have been affected by unauthorized insurers nationwide. This left over $250 million in unpaid medical claims for the providers and policy holders to sort out.

I would have assumed that individuals had been the major victims, but actually small businesses were hit very hard. So if you are solicited by an insurance agent, you should feel free to contact your state insurance department to verify his or her license to do business in your state. Also make sure you obtain the name of the insurance company your business is being sought for, and check them out with your state insurance board as well. Take this advice if you are an individual, seeking insurance for your family, or if you are a small business owner or representative looking to cover a company.

Avoiding the Bogus

Some warning signs to look for are company names that you have never heard of. One tactic unauthorized health insurers use is to make up names that sound a lot like major companies. Another tactic is to claim to be part of a multiple business group, and thus not subject to state regulation. Now, such things do exist under very specific situations, but you can still check them out with your state insurance department. Of course, the last red flags would be very low premium rates or promises that major health issues will not affect underwriting.

Even some experienced and ethical insurance agents have been duped in recent years. Unauthorized insurance companies use very slick promoters who use all of the right buzz words to solicit insurance agents. The agents may be seduced by the thought of being able to offer their clients a very inexpensive health insurance plan that will accept people with health conditions. Of course, insurance agents should always contact their state insurance board about unfamiliar insurance companies, but just like any group of people, agents can get complacent and be naïve.

Also be wary of purchasing a health discount plan when you are shopping for health insurance. A friend of mine, who happens to be a fairly sophisticated lawyer, asked me to check one out for her. I called the number, and was greeting by a very cheerful sounding salesperson who explained the benefits of a very cheap (by health insurance standards) plan. I asked five times if the plan was health insurance, and the question was evaded four times. On the last attempt, the salesperson lost his cheer, and asked me if I wanted health benefits or not. Nailed.

Health discount plans may be a legitimate way to save money. However, they are often sold as insurance, and they are not. Unwary consumers will certainly wish they had done their homework, if they buy a discount plan when they thought they had bought insurance, and then actually have to use the benefits!