Randy Shatz, vice president of Frank Shatz & Co., a Warwick woodworking shop, sees plenty of garbage faxes cross his desk – offers for dirt-cheap vacations to Aruba and the like. But when Shatz recently spotted a fax offering a family health plan for $49.99 a month, he did a double take.
“Obviously that’s the kind of thing that reminds you of the old adage: ‘If it sounds too good to be true it probably is,’” said Shatz, who promptly dropped the offer in the trash.
Richard Nagele, president of Advantage Marketing Information in North Kingstown, received the same fax. “It offered a family plan with no social security number required,” Nagele said. “That just screams of fraud.”
Nagele turned the fax over to the Central Rhode Island Chamber of Commerce (he is a past chairman), which promptly issued a press release warning small businesses to beware of unsolicited offers for discount health plans.
“There are a number of programs being advertised that are not health insurance coverage, but (discount) cards,” the chamber’s statement reads. “The chamber is concerned that managers may accept some of these misleading programs as a substitute for insurance protection.”
With so many small businesses struggling with spiraling health-care premiums, there has been a resurgence in the health-insurance scams nationally, observers say.
“Some small companies are fearful of losing employees if they don’t offer health benefits, and that’s one of the underlying factors that allows them to be sucked into some kind of scheme,” said Bill Mahon, executive director of the National Health Care Anti-Fraud Association in Washington, D.C.
Mahon said that while offers such as the $49.99 monthly family plan are obvious frauds, others have a sheen of legitimacy. Typically, the pseudo insurer will begin to amass premiums and even pay out a few small claims to lull customers into a sense of complacency – then disappear before having to pay any big claims.
Mahon said certain states, such as Florida and Texas, have seen a proliferation of bogus health-insurance scams, which have bilked thousands of people out of money.
It is unknown where the fax offering the $49.99 monthly deal originated. But G. Rollin Bartlett, chief life accident and health insurance analyst for the Rhode Island Department of Business Regulation, said the insurance division has not received complaints about bogus health-insurance scams in the state.
“We have been aware that some states have had difficulty with what we call ‘unauthorized plans,’” Bartlett said. “But we’ve had no inquiries here that would lead us to believe that such a plan is operating in Rhode Island.”
Bartlett said any entity that provides health insurance to Rhode Island businesses or consumers must be licensed with the DBR’s insurance division. He said businesses or consumers can check to make sure an insurer is licensed by calling the department at (401) 222-2223.
“We certainly can tell them whether or not the insurer is licensed,” Bartlett said. “That’s probably a good first step.”
In fact, Mahon said that is the No. 1 thing a purchaser of health insurance should do when considering a health-insurance contract – especially an offer from an unfamiliar entity.
“The most concrete thing you can do is to make sure that that insurance entity is licensed in your state,” Mahon said. “There is no federal licensing of insurers.”
Mahon said bogus insurers sometimes tell prospective buyers that they are “licensed under ERISA,” the federal law that regulates how employers provide certain benefits to employees. But that’s a dead giveaway, Mahon said, because there is no such thing as being “licensed under ERISA.”
In Rhode Island, of course, there are only a few health insurers that offer comprehensive health plans: Blue Cross & Blue Shield of Rhode Island, UnitedHealthcare of New England and Neighborhood Health Plan, which primarily insures the state’s RIte Care population.
But Bartlett said the state’s official list of entities licensed to sell health insurance is not limited to those insurers. Dozens or even hundreds of companies might be licensed to sell health insurance in the state, although only a few actively do so, Bartlett said.
For example, insurers that sell accidental-death insurance or disability insurance might technically be licensed to sell health insurance. Or, insurers that used to offer health plans in the state might still be licensed in Rhode Island.
Bartlett concurred with the chamber that some offers advertise discount cards or special fee schedules for individuals paying out-of-pocket costs. He said DBR’s insurance division only has jurisdiction over offers that purport to offer some sort of insurance product.
He said other suspect offers can be reported to the Attorney General’s Consumer Protection Unit, which can be reached at (401) 274-4400.
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