4 health insurance scams to avoid

Over the past two decades, health insurance rates have risen at an astronomical pace. Premiums have doubled—and tripled, in some cases—while benefits have been slashed in half and out-of-pocket costs have exponentially increased.

The result? A desperate American public either actively engaging in health insurance fraud purely to get the care they need or primed to fall for health insurance scams that promise better coverage for lower rates. 

4 types of health insurance scams to avoid 

According to the Federal Communications Commission (FCC) and Federal Trade Commission (FTC), health insurance scams tend to spike around open enrollment periods: Nov. 1 through Dec. 15 for the Affordable Care Act, and Oct. 15 through Dec. 7 for Medicare. This may be because people are most vulnerable to these scams when they are searching for affordable coverage for themselves and their families. Don’t be a victim of these ploys! Watch out for these warning signs, and common scams.

1. High medical discount plans

Medical discount plans often promise to save you money on items your insurance may not cover. You pay a monthly fee, and they offer slashed-price services. While there are some legitimate plans, if it seems too good to be true, it likely is. High-rate medical discount programs are often a red flag for fraud. Before you sign up for a medical plan, check the details and coverages carefully, make sure your doctor(s) participate, and get the terms in writing. 

“These programs are either fake, don’t cover the basic or essentials you need, or don’t have the promised discounts,” explains Shawn Plummer, owner and CEO of The Annuity Expert, representing over 50 insurance companies.  

2. Unexpected fees

Anyone trying to charge you a fee to help you find the best insurance policy is also likely running a scam. “People who legitimately help you with navigating the Health Insurance Marketplace are not allowed to charge you a fee,” Plummer says.

The same goes for being told you’ll have to pay for a new Medicare card, says Joshua Romo, an insurance broker for Arizona Life and Health Solutions. Government programs such as Medicare will never call or email you unexpectedly and say you’re going to lose your coverage or need to pay a fee immediately. If someone mentions a fee that doesn’t feel right, hang up and do some research. You can always call the government program directly to confirm any information. It’s important to never give your personal details in situations like this.

3. Suspicious claims

Government officials will not call your home. Neither will the IRS. If your insurance company needs to reach you, they will not ask you for personal details. Any caller identifying as a government representative or phishing for your information is likely running a scam. Health insurance phone scams almost always involve a caller posing as someone they aren’t and trying to get your personal information.  

A similar scam is when a scammer sends a fraudulent email that claims to be from a government official or includes threats of losing coverage. You can always contact the government agency or insurance company directly to ask a question or address a concern.

Another red flag? Any insurance company that claims their policies are licensed under the Employee Retirement Income Security Act (ERISA). “ERISA is a federal organization, but insurance companies are licensed by state organizations,” Plummer explains.

4. High-pressure sales tactics

Finally, consumers should be wary of high-pressure sales tactics that push them to sign up immediately for low rates. “They may not deliver what they promised and it’ll be hard for you to get out of it,” says Plummer. A legitimate broker won’t pressure you to act fast. Slow down and do your research before you make any commitments.

RELATED: Learn how to avoid Medicare fraud

Who is behind these scams?

It would be great if there was a database to refer to when trying to figure out if you are being scammed. Unfortunately, no such list exists. This is because there is no one specific group behind these scams. They are operated by individuals and organizations alike. Some are as simple as a single perpetrator posing as someone they aren’t to get your personal information, while others are as involved as fake insurance companies charging your card every month for premiums that ultimately never pay out. 

Scammers can easily change their names or tactics when word begins to spread about what they are doing. As quickly as one scammer is taken down, four or five more might start scamming—making it impossible to create a reference list.

The only real way consumers can protect themselves is by paying attention to red flags and refusing to work with any company that doesn’t already have an established reputation.

Why are there so many health insurance scams?

The sad truth is these scams exist because people are desperate for affordable coverage. “Most people know health insurance is important to cover unexpected large healthcare costs, but it can be more expensive than people realize,” Plummer explains. “This is why they can be tempted to take offers that seem too good to be true to cut down on medical expenses.”

Scams like this wouldn’t exist without people who are vulnerable to being scammed. But when people are struggling to find affordable coverage that will truly meet their needs, there are plenty of scam victims to choose from.

All of this leaves a long list of people vulnerable to these types of scams:

• Lower income individuals
• People with expensive medical conditions
• Those who don’t know much about health insurance
• People who don’t know how to verify what they are being told
• Older generations

On top of the need for coverage, there is also the fact that getting insurance is often a complicated process that leaves room for people to be taken advantage of. “Health insurance and the process of getting it can be complex, which means people can fall for scams easily if they don’t understand it well,” Plummer says. 

How to choose a reputable insurance company

There is no reliable list of scam insurance companies, but there are known reputable providers you can work with. “Reputable providers like Blue Cross Blue Shield and United Healthcare are not scams,” Plummer says.

The Better Business Bureau (BBB) is another option for checking an insurance company’s reputation. A lack of information there should generally be seen as a warning sign.

You can also feel safe using any company providing quotes through healthcare.gov, as they have already been vetted and you have an added layer of protection by purchasing insurance through a government portal. When enrolling in health insurance or Medicare, the safest way to do so is through the government portal. Short of that, you should call reputable companies directly and follow their steps for enrollment.

Whenever working over the phone with any insurance broker, you should ask the following questions:

• What is your agent number?
• What is your license number?
• What is your physical business address?

These types of questions seem to deter scammers pretty easily. Plummer says there are a few other ways you can protect yourself:

• Never provide financial information over the phone or by email.
• Be wary if you are sold a policy that doesn’t ask you to get a physical exam or provide medical history.
• Always research the company you intend to buy from.
• Never feel pressured to sign up on the spot.
• Ask a family member or a trusted friend to help you evaluate the company and share their perspective.

When in doubt, get off the phone and do some research. A legitimate company will encourage potential customers to do research while a scammer will feel threatened by this. The more research you do, the better off you’ll be. There are far too many reputable companies available to risk going with one you know little to nothing about. “If there is an agent that wants to get your coverage, they have tools like Zoom, Google Meet, and other ways to get in touch where you can see a face and they can provide simple yet very important pieces of info like printed licenses,” Romo says. “Most are even okay with providing a driver’s license to ensure you are feeling safe and can trust them.” If an agent isn’t willing to earn your trust, they likely aren’t worth working with.

How to report health insurance scams

If you feel as though you may have been taken advantage of by a health insurance scam, there are a few steps you need to take:

• Work with your bank to stop or dispute any payments you’ve made.
• Call the Health Insurance Marketplace to report the scam and seek assistance. 
• You can report health insurance and medical discount scams on reportfraud.ftc.gov. Medicare scams can be reported on medicare.gov.
• If you’ve given out personal information, Plummer recommends contacting your local police department to report it.
• Consider freezing your credit with Transunion, Equifax, and Experian so a scammer can’t impact your credit score.  Find out more information from the FTC about how to freeze your credit here.

Try not to be too hard on yourself throughout this process. These scammers are skilled at revising and updating their tactics just often enough to ensure as many people as possible fall victim to them. You certainly aren’t alone in having to take these steps now.