New warnings about fraudulent health plans

by Tony Novak, MBA, MT, OnlineAdviser at Freedom Benefits revised 11/29/2011

A number of government and consumer agencies have joined the effort to warn consumers about fraudulent health plans. The problematic plans fall into two categories: frequent discount health plans and illegal health insurance plans. These plans are marketed primarily to individuals and small businesses who do not have easy access to professional financial advice and are therefore more likely to become victims of mass marketers promoting fraudulent health plans.

The aggressive marketing of discount health plans that have left some patients with unexpected medical bills from members who believed that the plans would serve as a substitute for health insurance. Over the past few years, OnlineAdviser service¹ has received an increasing number of calls from consumers who were confused by the plans and enrolled with false and unrealistic expectations from sales agents or Internet-based advertisements of these fraudulent plans. OnlineAdviser service has previously published a number of consumer warnings, including the article titled “Comparing Discount Health Plans” at www.tonynovak.com. Legitimate discount health plans are only useful in the member realizes that these plans help with only a small portion of the medical bills and that they are not a substitute for a health insurance plan.

Consumers should look or signs that distinguish a legitimate discount health plan from a fraudulent plan. Legitimate health discount plans do not rely on high-pressure sales agents or spam e-mail advertising. A discount health plan is worthwhile only if: 1) it costs much less than the expected medical bills. (We suggest paying no more than $100 for the year), 2) it offers a generous risk-free trial, 3) is backed by a reputable company, and 4) is not used as a replacement for health insurance.

The Kansas Insurance Department and the Wisconsin Office of the Commissioner of Insurance issued statements this week to warn about the increases in people being duped by deceptive companies operating in their state.

A principal of the Fraud Discovery Institute was quoted in the Wall Street Journal as saying that this field is “ripe for exploitation”. The Coalition Against Insurance Fraud objects to plans that use the term “coverage” or “benefits” that can fool a person into thinking that the discount plan is somehow comparable to a health insurance plan.

In a separate but similar warning, the consumer advocacy group Families USA issued a warning to consumers about health plans marketed through “associations”. Consumers should be aware that all health plans are regulated by their state of residence and that special deals or lower pricing are not available to members who belong to a certain business association. Legitimate business association health plans offer special services and providers to their members but this does not affect the price or availability of health plans. Legitimate health plans can be checked online through the National Association of Insurance Commissioners Web site at www.naic.org.

¹ the author and the OnlineAdviser network, including its affiliates, distribute and provide marketing or consulting support to health plans of the type covered in this article but it is our policy not to mention specific plans by name in publications.

Tony Novak is a member of the Pennsylvania Institute of Certified Public Accountants, the New Jersey Society of Certified Public Accountants and an accredited member of the Better Business Bureau.

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