Marketing scams have been around for years, and their latest version combines the hard-sell tactics of door-to-door solicitation with one of the major pocketbook issues of today: health insurance. This version is being peddled by pitchmen hoping to take advantage of the recently passed health care reform bill and the public confusion that surrounds it.
The bogus policies, designed to trigger a false sense of urgency, include claiming that consumers have only a limited amount of time to enroll and falsely stating that they will be left without affordable health care if they don't act now. Other plans purport to offer substantial discounts on health care and prescription drug costs. Some have even set up toll-free numbers, noted Health and Human Services Secretary Kathleen Sebelius in a letter to state insurance commissioners earlier this month.
"Some have attempted to make dishonest profits by urging consumers to obtain coverage in a non-existent 'limited-enrollment plan' that they falsely claim was made possible by the new legislation," Sebelius wrote. She promised her agency's health care fraud and prevention action teams will vigorously monitor and crack down on new forms of abuse, and urged state attorneys general to do the same.
In response to the letter, the National Association of Insurance Commissioners (NAIC) has issued its own warning, pointing out that there are no provisions in the Patient Protection and Affordable Care Act of 2009 (PPACA) that require consumers to make immediate modifications to their health coverage. In fact, the requirement that all Americans purchase health care does not go into effect until 2014. Similarly, there is no open enrollment period associated with the new health care law.
NAIC also reminds consumers they should be wary of salespeople who peddle health care policies but don't explain their limits. Bare-bones plans are a legitimate health insurance option, but they come with conditions that may cost you more in deductibles and out-of-pocket expenses, despite the typically lower premiums, thus providing little, if any, practical coverage. And, since only policies purchased before March 23, 2010, will be "grandfathered" or exempted from changes required by the new law, you should be on high alert if a salesperson claims the coverage they are offering skirts those changes. The best course of action when in doubt is to call your state insurance department to verify that the agent, policy, and company are legitimate.
The New York State Insurance Department added that TV ads and Internet pop-ups are also part of the mix -- urging consumers to call toll-free numbers to take advantage of coverage available "now that historic health care legislation has passed."
"There have been reports around the country about people being victimized into buying worthless insurance policies in the wake of the health care debate," Insurance Superintendent James Wrynn said in a written statement. "We have seen a number of reports like this in New York... We want to make sure [consumers] recognize the telltale signs of insurance fraud."
Take the first steps to building your portfolio.View Course »