Scams, Fraud Among Obamacare Concerns

The health care overhaul could create an opening for unscrupulous businesses

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The bureaucrats at the United States Department of Health and Human Services aren’t the only ones gearing up for the launch of President Obama’s signature health care law. Scammers and peddlers of health insurance-like products that sometimes dupe unsuspecting consumers are also in heavy preparation mode, eager to capitalize on the confusion policy experts say will accompany the Oct. 1 launch of the new insurance marketplaces that are a core feature of the Affordable Care Act.

“This is already starting and it’s only going to accelerate,” says Sabrina Corlette, a research professor at Georgetown University’s Health Policy Institute. In addition to illegal schemes to defraud consumers, “There are companies and [insurance] brokers that might take advantage of consumer confusion and some of the misinformation out there about new coverage options under the Affordable Care Act,” she says.

Elizabeth Abbott, director of administrative advocacy for the consumer group Health Access California, puts it more bluntly. “There are people licking their chops and saying, ‘A sucker is born every minute,’” she says.

(MORE: President Trumpets Obamacare Rebates as Deadline Approaches)

Understanding the details of a standard health insurance policy is hard enough. From co-pays and co-insurance to deductibles and generic versus name-brand drug coverage, the process of insuring one’s health can be a confusing jumble of paperwork and red tape. And polls show few Americans understand how the major healthcare law will affect them. This lack of awareness, coupled with numerous Obamacare regulations — especially the requirement that most Americans have health insurance or pay federal fines — is expected to create prime opportunities for illegal scammers and legal products that consumers mistakenly confuse for legitimate health insurance.

Of particular concern to consumer advocates are so-called “discount medical plans.” These products, which are often billed as affordable alternatives to standard health coverage, are not insurance at all. For an upfront enrollment fee plus a paid monthly subscription, consumers supposedly get deep discounts on medical services from doctors, hospitals and dentists within the companies’ networks. In reality, the discounts are often no more favorable than those that individual uninsured patients could negotiate on their own. On its website, the Federal Trade Commission says that while some discount medical plans provide real discounts, “others take people’s money and offer very little in return.”

Shortly after Massachusetts passed comprehensive health care reform in 2006, the state was flooded with discount medical plans marketing themselves are cheap health insurance or viable alternatives to coverage. Several were eventually sued by the state for deceptive marketing practices.

Ameriplan, one of the country’s largest seller’s of discount medical plans, includes a disclaimer on its website warning that its products “are NOT health insurance.” But it lures potential customers by using language most would associate with comprehensive coverage, such as: “All ongoing medical problems are accepted…no waiting periods…no deductible.”

Barry Friedman, a communications consultant for Ameriplan, concedes that some people purchase discount medical plans not fully understanding the products’ limitations. “One of the major confusion points we hear is that some people buy it thinking it’s a full-blown health insurance plan and somebody else is willing to pay the bill for you and that’s not so,” says Friedman. Still, he says, Ameriplan’s cancellation rate is less than 10 percent and the company offers a service to uninsured patients having to pay out-of-pocket for medical care.

(MORE: Fewer Hospitals May Lead to Higher Prices)

“These discount medical plan companies have capitalized on the high cost of health insurance to say, ‘Hey, we can offer insurance or insurance-like products at a much lower price,” says Lori Swanson, Minnesota’s attorney general. “The problem is people pay the money, buy a plan and when they get sick, they find out they don’t have the financial security they thought they had.”

Swanson has sued several discount medical providers (Ameriplan is not one) for deceptive marketing practices, ultimately forcing some companies to pay restitution to duped consumers. “We’ve seen a real disconnect between how they’ve been marketed and the reality of the coverage that they provide,” says Swanson.

Unlike comprehensive health insurance, discount medical plans operate outside the regulatory system in many states. “Individuals coming into the market who have never had or purchased health insurance before—their level of understanding and knowledge I pretty limited,” says Linda Sheppard, director of health policy analysis in the Kansas Department of Insurance. “If somebody calls you or comes to your door and says, ‘Buy this, it fulfills your Obamacare requirement,’ somebody might not know enough to understand what it is.”

Other health insurance-like products that could proliferate under Obamacare are plans that pay fixed amounts for doctor visits or hospital stays, regardless of the true cost or amount charged to patients. Known as “fixed indemnity insurance,” these plans also typically require payment of an enrollment fee and monthly charges. Added up, these fees are very often more than whatever savings consumers might see if they get sick. A 2012 memorandum by a group of consumer representatives to the National Association of Insurance Commissioners said these limited benefit plans “may lead consumers to mistakenly believe they are purchasing comprehensive coverage,” adding “In the short-term there is a substantial likelihood of fraud, or at least misunderstanding” in the sale of these plans.

Fixed indemnity plans are exempted from Obamacare’s new health insurance regulations that prohibit annual limits on coverage and require insurers to cover a basic list of medical services. Corlette, of Georgetown, noted in a recent blog post that there has already been a significant increase in policies being marketed as “fixed indemnity” to avoid Obamacare’s rules.

(MORE: Obamacare Delay Increases Costs and Complications)

A similar product, known as “mini-med plans,” will be banned by the federal government beginning in October but they may not disappear. The plans are technically insurance, but that they pay only a small percentage of the holder’s incurred total medical costs. The responsibility for shutting the mini-med plans down rests with state insurance regulators and experts question if they will all follow through. “Will the states crack down on them?” asks Timothy Jost, a law professor at Washington and Lee University and an expert on insurance regulation. “Well, a number of states aren’t enforcing the Affordable Care Act at all,” meaning states led by officials politically opposed to the law may be less vigilant in shutting down companies selling products outlawed by Obamacare.

In addition to legal, but confusing, insurance-like products, consumer advocates expect Obamacare to unleash a wave of illegal scams. The Federal Trade Commission and Better Business Bureau recently posted notices warning consumers about the possibility of identity theft due to the new health care law.

“It’s a fairly common theme to see scammers and those who seek to take advantage of people exploit passage of new laws,” says Swanson, the Minnesota attorney general. She says similar schemes followed the launch of the nationwide “do not call” registry and when the federal government offered programs to help homeowners in the wake of the recent mortgage crisis. In both cases, scammers called consumers and asked for bank information.

Some dubious schemes are far less sophisticated. One health insurance broker in Pennsylvania recently set up a website posing as that state’s Obamacare insurance exchange. Using the official state seal, the title “Pennsylvania Health Exchange” and the tagline, a “hub for all your health insurance needs,” the site appeared to be an official government resource. The broker, who was hoping to generate business through the site, took it down after a warning from the state insurance department.

With or without Obamacare, the intangibility of health insurance makes it especially ripe for scams and deceptive marketing. “Insurance,” says Swanson, “is just a promise and sometimes that promise turns out to be very, very empty at the time you most need it.”

VIDEO: Organizing For Action Releases Obamacare Ad

66 comments
StephanieWilliams
StephanieWilliams

I have been working with AmeriPlan for a while now, and we are always instructed to make it very clear to potential and current members that we are not insurance, and do not coincide with the Affordable Care Act.  We are always told to market as a discount plan and not an insurance plan.  I simply give people information about what we offer, and encourage them to decide what the best course of action is for their family. 

freedomfighterX
freedomfighterX

Socialism leads to Communism. Obamacare is about control. Wake Up America before it's to late. Share this documentary now: Grinding Down America: http://vimeo.com/63749370 with your Friends & Family. Vote the Democratic Socialist Party out of office 2014. See what Barak & his communist party have planned for your family & America. You'll be shocked & appalled.


freedomfighterX
freedomfighterX

Wake Up America before it's to late. Socialism leads to Communism. Obamacare is about control. Share this documentary now: Grinding Down America: http://vimeo.com/63749370 with your Friends & Family. Vote the Democratic Socialist Party out of office 2014. See what Barak & his communist party have planned for your family & America. You'll be shocked & appalled.

JdReader
JdReader

So the crooks are blaming the government.  amazing.

La_Randy
La_Randy

So criminals in the private sector plot fraud against the government and it is the governments fault. Maybe we should blame the victims of theft instead of the thieves, they would certainly be easier to catch.

BillShut
BillShut

So there's people scamming the Obamacare? Which is, in itself, a scam? Obama must be p-o'd about the copycats!!

swagger
swagger

single payer, medicare for all.  cut the 30% profit middleman health insurance racket out of the health care system.

pendragon05
pendragon05

Every time the US government gets involved with something they totally screw it up.

DavidBell
DavidBell

The scammers are certainly on the way.   They're called HHS staff.

littleredtop
littleredtop

This is an obamanation - get used to it.

shepherdwong
shepherdwong

I would imagine that starting with what qualifies under the individual mandate in the ACA (and what is offered under state exchanges) would take care of most of the problem.

paulejb
paulejb

Democrats Own Obamacare

"When they passed Obamacare, Democrats thought they were achieving a triumph free of any cost. Now, as Obamacare founders, they are paying the price."

jbwillikers
jbwillikers

Fraud? In a government program? That is just considered another benefit for democrats.

jkk1943
jkk1943

The biggest fraud confronting the looming implementation of Obamacare is not unscrupulous businesses it is the lack of verification controls for the exchange subsidies. This feckless administration admits that the systems are not in place to insure that persons applying for the federal subsidies qualify for them. They plan to go ahead and implement the exchanges anyway and will take a persons unverified word on their financial situation. This is an open door to billions in fraud and sufficient recason alone to postpone the individual mandate until the controls are in place.

auntcindy1000
auntcindy1000

Just be an informed consumer.  Plain and simple.   Until we have single payer, read the fine print.  I only work full time for health benefits, and plan to work 4 days a week in a few years.   So being able to buy your own insurance without breaking the bank is a great option.  Looking forward to the opening of the exchanges.   Remember folks, Medicare looks a lot different now than it did when it was instituted.  Let's fix what doesn't work and expand what does.

paulejb
paulejb

Barack Hussein Obama is the Bernie Madoff of the health care industry.

NicolasEdwards
NicolasEdwards

@pendragon05 Yeah, like highways and helping the disabled. Rural water and electric suck. I hate that the government did that. 

shepherdwong
shepherdwong

@paulejb

"Aetna has withdrawn its application to sell individual health insurance plans through a public exchange after the state Insurance Department told the insurer its proposed rates were too high...Kevin Counihan, CEO of Connecticut’s health exchange, said consumers will have a broad number of choices even without Aetna."

So, doing it's job of keeping consumers from being gouged by greedy insurance companies. Moron.

paulejb
paulejb

@shepherdwong 

Except that the exchanges do not screen applicants for fraudulent claims of eligibility.

shepherdwong
shepherdwong

@paulejb"When they passed Obamacare, Democrats thought they were achieving a triumph free of any cost."

Again, you're a complete moron. Democrats had already endured months of Republican lies (see: "death panels") that confused and/or soured the public against the Heritage Foundation/Mitt Romney solution to universal health care insurance coverage.

"Overall opinions of the health care law have barely wavered since its passage in March 2010, and support for it has never reached 50 percent in CBS News Polls. Back in May 2010, two months after it was passed, 43 percent of Americans approved of the law - that's the highest percentage to date."

http://www.cbsnews.com/8301-250_162-57462689/public-opinion-of-the-health-care-law/

Just STFU. It appears to be the only way to stop making an @ss of yourself.

mantisdragon91
mantisdragon91

@paulejb

That's because these people live in states where insurers were allowed to sell bare-bones plans and exclude the sick, which has kept costs down. Under Obamacare, insurers must offer a package of essential benefits -- including maternity, mental health and medications -- and must cover all who apply. But more comprehensive coverage may lead to more expensive insurance plans.  

paulejb
paulejb

@jkk1943 

Its just a larger version of the Obamaphone and food stamp programs. Mike Bloomberg could get an Obama subsidy if he applied.

paulejb
paulejb

@auntcindy1000 

Medicare is the home of health care fraud. Billions are scammed from the system each year.

paulejb
paulejb

@shepherdwong @paulejb 

Choices are diminishing as Obamacare narrows the field. The whole design was to eventually drive out competition to government health care.

shepherdwong
shepherdwong

@paulejb"The whole design was to eventually drive out competition to government health care."

What government health care? There's no such thing unless you're desperately poor or over 64. How do you manage to keep putting your ignorance and stupidity on public display without the slightest embarrassment?

shepherdwong
shepherdwong

@paulejbIf the terms of the debate weren't being set by naked liars and propagandists, and if done properly, so-called "Death Panels" would more accurately be called "Life Panels" since they would determine which procedures actually increase the longevity of the the living, and which procedures actually improve the quality of life for the dying.

shepherdwong
shepherdwong

@paulejb "Listen and weep, Wong."

Yes, it's quite sad what we spend on people who are about to die regardless of what we do to them:

"One out of every four Medicare dollars, more than $125 billion, is spent on services for the 5% of beneficiaries in their last year of life. Yet even with Medicare or private insurance, you're likely to face a big bill: A recent Mount Sinai School of Medicine study found that out-of-pocket expenses for Medicare recipients during the five years before their death averaged about $39,000 for individuals, $51,000 for couples, and up to $66,000 for people with long-term illnesses like Alzheimer's..."

"...Worse, they often suffer through unnecessary, even harmful treatments. Says Ira Byock, director of palliative medicine at Dartmouth-Hitchcock Medical Center and author of "The Best Care Possible": "When patients have a terminal illness, at some point more disease treatment does not equal better care." 

http://money.cnn.com/2012/12/11/pf/end-of-life-care-duplicate-2.moneymag/index.html 

mantisdragon91
mantisdragon91

@paulejb @shepherdwong The Death Panels that already exist? You know like every time an Insurance provider denies you based on a pre existing condition.

shepherdwong
shepherdwong

@paulejb

Republicans rewarded the biggest Medicare fraudster in the country by electing him Governor of Florida. Who encourages fraud? You're an idiot.


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