Unscrupulous brokers, sales scams abound

Alongside reports that brokers are becoming health insurance advisors in the post-reform market, recent news describes fraud some brokers commit to enrich themselves at the public's expense. Broker fraud is part of a widening circle of sales scams.

A broker in New Jersey, for instance, stole nearly $1 million by selling health insurance coverage he allegedly knew was bogus, LifeHealthPro reported.

David Clark owned Real Benefits Association (RBA), which he marketed as a labor organization and health insurance sales vehicle, prosecutors said. Initially, RBA Welfare Plan was fully insured through a licensed organization. But that insurer was bought by another company that canceled its policy with RBA. The federal government informed Clark that RBA was not a labor organization and told him to stop selling health plans.

But he didn't. Buyers later complained to regulators that medical claims weren't being paid, which prompted additional cease-and-desist orders to Clark from across the country. Clark collected approximately $1,789,596 in premiums and diverted about $962,027 for personal use, the article noted.

Meanwhile, in Virginia, a judge sentenced a former insurance executive to 18 months in prison for a scam related to university-sponsored health insurance that cost Virginia Tech and its students up to $20 million, according to The Roanoke Times.

Prosecutors said John Paul Gutschlag's company, the third-party insurance administrator GM-Southwest, falsified claims reports that tricked students into paying overpriced premiums from 2005 through 2011. Virginia Tech continued its relationship with GM-Southwest until a new risk manager started asking questions in 2010, The Times wrote.

And senior citizens should be wary of numerous scams meant to steal their medical identities and money, the Wisconsin Better Business Bureau warned, according to The Northwoods River News. Many of these schemes involve health insurance fraud.

Through telephone or email messages, for example, criminals pretend to be Medicare or payer representatives. They tell intended victims they're sending a new insurance identification card or announcing a new plan that requires disclosure of personal information, the BBB noted. And some scammers convince victims to make an initial payment for the bogus new card or plan.

For more:
- here's the LifeHealthPro article
- read The Roanoke Times article
- see The Northwoods River News article