State warns businesses of health insurance scams

A growing trend in disreputable insurance companies taking advantage of small-business owners desperate for affordable health care has the New Hampshire Insurance Department urging businesses to be cautious when buying plans for their employees.

The federal Government Accountability Office reported in February that the Department of Labor and state insurance commissioners have identified 144 unauthorized insurance entities covering at least 15,000 employers and more than 200,000 policyholders from 2000 through 2002, resulting in at least $252 million in unpaid claims.

The report revealed that “more than half of the entities identified frequently targeted their health benefits to small employers.”

Kathy Belanger, director of consumer services for the New Hampshire Insurance Department, said the numbers of bogus insurance companies are indeed rising.

“Although we didn’t track the numbers, inquiries into these types of companies used to be pretty rare, but now we’re seeing an upsurge,” she said.

New Hampshire law states, with a few exceptions, that no insurance product can be sold by individual agents, brokers or companies in the state without the approval of the Insurance Department. The law seeks to block any insurance plan that is intended to defraud consumers or businesses.

In many cases, purveyors of such insurance plans are relatively easy to spot. Belanger cites a common tactic of using broadcast faxes that include only an 800 number and no company name. “Sometimes, they’ll use just a drop box address,” she said.

Some dubious insurance outfits will offer extensive coverage, including coverage for pre-existing conditions, chiropractic care and alternative medicine therapies for extremely low prices.

“One company offered all this and more for an entire family, requiring no health-care information, for $89 a month. Claims like that should raise some flags,” said Belanger.

But other insurance scams can be quite deceptive, such as those that use a name similar to a recognized insurance provider.

Ask hard questions

Health discount plans also are quickly emerging on the marketplace, and the Insurance Department and the attorney general’s office have been urging business owners to be cautious about purchasing such plans.

Health discount plans are just that – plans that offer discounted rates for treatments or procedures through specific providers. They are not insurance companies; they do not pay claims; they do not issue a policy; nor do they carry any risk for the issuing company. Holders of such plans are responsible for the entirety of their medical bills.

Because they are not insurance, they are not under the jurisdiction of the state Insurance Department.

Belanger said small businesses should be particularly wary of such discount plans. “Many will use language that sounds like an insurance company — such as talking about ‘benefits’ — but they are really a discount plan.”

She said these plans may have only one provider that honors the discount, and that provider may be hundreds of miles away. In addition, the plans may not even guarantee that their providers will honor the discount.

“The providers themselves may be unaware that the discount plan is even using their names,” she said.

Some discount plans may admit up-front they are not insurance companies, but may require joining as a member of an association.

“Some membership agreements have provisions not guaranteeing the discounts,” Belanger said.

Belanger urged all businesses and consumers to be aware of deceptive insurance companies and health discount plans. “First of all, if you have any questions, contact us to see if they are licensed. That’s the very first thing. If it’s a true insurance product, it has to be licensed.”

She said to ask hard questions, such as asking for references from other enrolled employers. “If they are evasive or give only partial answers, beware.”

Belanger stressed never giving out any financial information, especially if policy or program materials will not be sent without it. If you do receive policy information, she said to read it carefully.

She cautioned that small businesses in particular should be “extremely careful” when it comes to buying health care at steeply discounted prices. “It’s expensive to cover employees, and some businesses might be tempted to bite too soon. If it sounds too good to be true, it probably is.”