Greg's Corner

Paying for Coverage That Doesn’t Cover Anything

By Greg Collier

Shopping for health insurance is already stressful, particularly when premiums are rising and household budgets are stretched. But the search for affordable coverage can lead consumers into an entirely different kind of financial disaster when a seemingly attractive insurance offer turns out to be little more than an expensive promise.

Some fraudulent health coverage operations are advertising unusually low premiums, collecting payments and then refusing to cover major medical expenses. In the worst cases, people who believed they were insured have ended up facing hospital bills reaching hundreds of thousands of dollars.

As open enrollment gets underway, officials are warning consumers about a growing problem that extends beyond any one state. Oregon regulators have reported a sharp increase in complaints involving questionable health coverage, but the same basic scheme can target anyone searching online for an affordable insurance plan.

The Health Insurance That Doesn’t Pay When You Need It

According to Oregon news station KVAL, Oregon’s Division of Financial Regulation is seeing an increase in fraudulent and misleading health coverage offers. Insurance Commissioner TK Keen says some consumers are being sold plans that promise far more protection than they actually provide.

One particularly troubling example involves arrangements in which an organization collects money from members and describes itself as a group that shares health care costs rather than an actual insurance company. When a member needs expensive medical treatment, the organization may decide whether it will contribute toward the bill.

That distinction can become devastating when someone assumes the arrangement functions like traditional health insurance. Keen described cases in which consumers suffered major medical emergencies, including heart attacks, and subsequently received hospital bills ranging from $70,000 to $100,000. The organization they had been paying did not cover the expenses.

The consumer is left dealing with the medical crisis and a massive financial obligation, despite having spent money believing they had protection.

Other schemes are more straightforward. Fraudulent websites advertise health insurance policies with extremely low premiums, collecting payments from people who may not discover the coverage is worthless until they try to use it.

Rising Costs Make Consumers More Vulnerable

The timing of the warning is significant. Health insurance costs have become a growing concern for many households, and consumers facing higher premiums may be tempted by alternatives that appear to offer similar coverage for a fraction of the price.

Keen told KVAL that the expiration of federal Affordable Care Act subsidies at the end of last year contributed to higher insurance costs, pushing some people to search for cheaper options.

Scammers and questionable coverage providers understand that desperation. An offer promising comprehensive coverage at an unusually low monthly price can look like a welcome solution to someone worried about affording medical care.

These offers are easy to find through online searches. Someone searching Google for health insurance or health coverage can encounter a wide variety of plans and arrangements, making it difficult to distinguish legitimate insurance from questionable alternatives.

That is what makes this a problem for consumers nationwide. The websites and online advertisements promoting these offers are not confined to the communities where regulators first identify them. Anyone searching for affordable coverage can potentially encounter them.

Not Every Health Coverage Offer Is Actual Insurance

One of the biggest problems is that some organizations deliberately blur the distinction between health insurance and other arrangements for paying medical expenses.

Health care sharing arrangements, for example, may collect contributions from members and distribute money toward eligible medical expenses. But they are not necessarily insurance policies, and they may not guarantee payment when someone needs care.

A consumer who sees words such as “health coverage,” “medical benefits” or “health care protection” may assume the arrangement offers the same safeguards as a conventional insurance policy. That assumption can prove costly.

Before signing up, consumers should understand exactly what they are purchasing, what medical services are covered, whether payments are guaranteed, and what happens when they need expensive treatment. They should also determine whether the company or agent is properly licensed to sell insurance in their state.

An unusually low premium should be a reason to investigate, not an automatic reason to celebrate.

How to Avoid Fake Health Insurance Offers

Regulators recommend working with a qualified insurance agent and using trusted sources when comparing coverage. Consumers should be especially cautious of websites promising extensive benefits at prices that seem dramatically lower than comparable plans.

Be careful about how you find those websites, too. Oregon officials advise consumers to type a known insurance marketplace’s web address directly into their browser rather than clicking unfamiliar search results. They also caution against relying on paid advertisements when looking for coverage.

If an offer comes from an unfamiliar company, verify its licensing status with your state’s insurance regulator before providing payment information or personal details. A legitimate-looking website, professional sales pitch, or official-sounding company name does not establish that the organization is authorized to sell insurance.

Consumers should also read the actual policy or membership agreement rather than relying on verbal promises. Ask direct questions about hospital stays, emergency treatment, prescription drugs, preexisting conditions, and major medical procedures. If the representative cannot clearly explain what is covered, that is a reason to walk away.

Complaints Are Rising as Open Enrollment Continues

The increase in complaints reported by Oregon regulators shows how quickly these problems can grow. Keen said the state would normally receive an average of about five complaints per month involving these issues. That number has climbed to approximately 20 to 30 complaints monthly.

The Division of Financial Regulation says it works with state and federal law enforcement to investigate suspected fraud and pursue cases when appropriate.

The open enrollment period makes the warning especially timely. According to the Oregon report, enrollment ends January 15. People seeking coverage beginning January 1 must enroll by December 31, while those enrolling later will generally have coverage begin February 1.

Consumers should avoid letting enrollment deadlines push them into a decision they have not properly researched. A plan that looks affordable today could become a financial catastrophe if it fails to pay when a medical emergency occurs.

Cheap Health Coverage Can Come With an Enormous Price

Health insurance is supposed to provide financial protection when people need medical care. But scammers and misleading coverage operations are exploiting the difficulty many consumers face when trying to afford it.

A monthly payment that seems manageable can create a false sense of security, particularly when the seller promises protection against major medical expenses. The real cost may not become apparent until a hospital sends a bill for $70,000 or more and the supposed coverage provider refuses to pay.

The Oregon warning should serve as a reminder to consumers everywhere: Not everything advertised as health coverage is health insurance, and a low premium does not necessarily mean a good deal.

Before handing over money, verify the company, understand the coverage, and make sure the policy provides the protection being promised. When it comes to health insurance, discovering that your plan isn’t real after a medical emergency is far too expensive a lesson to learn.