Scams Target Hard-to-Insure
Investigators said fraudulent operators often target persons and business that traditionally have difficulty affording health insurance. Those include construction workers, farmers, mechanics, and food service workers. Companies frequently offer small businesses or workers the chance to join with other customers in an association designed to offer low-cost group insurance.
"Small employers and workers in small businesses are most vulnerable to these scams," said Assistant Secretary of Labor Ann L. Combs.
A federal law called the Employee Retirement and Income Security Act (ERISA) exempts insurance companies that do business in multiple states from most state insurance regulations. Insurance firms still must get state authorization to operate, but the widespread exemptions make it difficult for regulators to track and close down firms that don't pay claims as promised.
"We normally can't do so until a great deal of harm has been done," said Jose Montemayor, commissioner of insurance for Texas.
Legislation in the Works
Many Republicans on Capitol Hill are pushing for a new law that would allow associations of small business to join together to purchase lower cost insurance while being exempt from state insurance laws. The Department of Labor supports the proposal, saying that it has safeguards built in to guarantee financial solvency and timely payments from the companies. President Bush has endorsed the plan and urged Congress to pass it.
But Democrats seized on Wednesday's report as evidence that allowing exemptions for the plans would make it easier for fraudulent companies to operate free from state rules. Many also worry that insurers would offer insurance only to associations of relatively young and healthy workers who are cheap to insure, leaving older and sicker people out.
"Since when have we relied on insurance companies to regulate themselves?" said Sen. John D. Rockefeller (D-W.Va.). "The history has been health claims not being paid."
Grassley's office released several tips to help consumers avoid fraudulent insurance companies:
1. Before You Buy, Verify. Contact your state insurance department and the Department of Labor to verify that the plan is licensed in your state and if it has a complaint history. Ask if the agent is licensed.
2. Compare. If two plans are similar or identical in benefits but differ a lot in price, it's time to start asking questions.
3. Be Alert. Many bogus plans are posting fliers on telephone poles, sending materials across fax machines, and advertising on the Internet. Make sure you ask plenty of questions. If it looks too good to be true, it probably is.
4. Be Aware of Pre-Existing Conditions. Many insurance companies will not write a policy for a person with a pre-existing condition. If your health plan will and the rate is not substantially higher, start asking questions and researching.
5. Many bogus plans are using names similar to those of well-known and reputable insurance companies. Make sure the plan you think you are enrolling in is in fact that plan.
6. Act FAST. Typically, phony health plans will not pay medical bills or may only pay small ones. If you find that your health insurance is not paying your medical bills in a timely fashion, call your state insurance department and the Department of Labor.