Fake health plans increasing

Fraud bureaus are reporting an increase in fake health plans, according to the Coalition Against Insurance Fraud, an anti-fraud watchdog nonprofit. The plans may sound legitimate, but pay little to nothing in claims, ultimately leaving consumers to fend for themselves.

The scams are part of a two-and-a-half year trend that emerged amid growing anxiety about the economy and people's worry over finding affordable healthcare coverage. Nearly 60 percent of state fraud bureaus last year said they had seen a sharp rise in fake health plans, according to a survey conducted by the coalition.

Con artists more recently have tried to exploit consumer confusion over the provisions of the federal healthcare reform law passed in March, according to the coalition. In Illinois, for instance, an elderly woman recently bought coverage against death panels from a telemarketer.

Phony health plans come in many shapes, according to the Insurance Journal. But they all operate under the radar without required state licenses. Most promise full-benefit coverage, but then deliver "fake coverage that's a worthless piece of paper," limited-benefit plans that are nearly useless, and medical discount cards that offer price breaks on medical services but still require buyers to pay out of their own pockets, reports the coalition.

For example, a Colorado man hurt in a hit-and-run accident had hospital bills that totaled $43,000 before he died. His so-called health plan, the National Trade Business Alliance, paid out just $250, the Insurance Journal reports. Another fake plan, the American Trade Association, has bilked at least 12,000 people out of $14 million in stolen premiums nationally.

Regulators have issued emergency cease-and-desist orders, but these they are often too late to protect consumers. Lawsuits may also help recoup some of the stolen money and put the fraudulent operations out of business.

To learn more:
- check this list of 73 health plans the Coalition Against Insurance Fraud says you should avoid
- read this list of 10 warning signs of a healthcare insurance scam
- read the Insurance Journal piece
- check out CNN's report

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