A rapid rise in fraudulent health insurance plans has left more than 100,000 people with millions of dollars in medical debts and no coverage, according to a report released today.
The study, by the Health Policy Institute of Georgetown University in Washington, said companies selling phony insurance policies collect premiums from enrollees but fail to pay medical providers. Consumers are often left with huge medical bills.
Most victims are self-employed individuals and small businesses.
More than 10,000 Georgians have been left uninsured as a result of these scams, said Insurance Commissioner John Oxendine's office.
The report, commissioned by the Commonwealth Fund, a New York health policy research foundation, studied scams in eight states in 2001 and 2002. Georgia was not included.
Since 2001, four unauthorized insurance plans nationally have left nearly 100,000 people with approximately $85 million in unpaid medical debts and without health coverage, the report says. Many other illegal plans exist, and the total number of scam victims nationally is much higher than 100,000, said Mila Kofman, an assistant research professor at Georgetown and primary author of the report.
Unauthorized plans aren't licensed, as states require, and thus can avoid important consumer protections, including solvency standards. The policies are often sold through professional or trade groups, though some set up their own phony organizations, Kofman said.
One unauthorized plan studied by Georgetown, called Local 125, is being investigated in Georgia, Oxendine's office said.
In a typical scenario, a consumer buys a policy from a fraudulent plan, undergoes surgery and winds up "stuck with $100,000 in debt," Kofman said. Other patients can't get authorization for medical procedures and delay needed care. "One victim has permanent eye impairment from delaying surgery,'' Kofman said. Activity in Georgia
Oxendine said his office has investigated about a dozen unauthorized plans in Georgia. The scams have left Georgians with more than $10 million in medical bills that have not been paid, the agency said.
"Whenever the economy is bad, people are trying to save money, and health insurance is expensive,'' Oxendine said. "It's a good environment for a con man.''
Georgia recently enacted a law to crack down on insurance scams.
The Commonwealth Fund's president, Karen Davis, said the scams prey on people who are seeking affordable health insurance.
"Not only do we need better methods to identify and shut down illegal operations, we need to expand access to affordable coverage and reduce the demand that phony plans are exploiting,'' Davis said.
Health insurance scams have been rising over the past two years as insurance premiums have increased at double-digit percentage rates, Kofman said. A similar spike in illegal plans occurred in the late 1980s and early 1990s, when premiums also skyrocketed, she said.
"People are desperate for affordable alternatives, and there's really nothing out there in the private market,'' Kofman said. 'Too good to be true'
The unauthorized plans are priced at about 20 percent to 30 percent lower than other insurance policies, she said.
Bert Fridlin, Georgia's director of the National Federation of Independent Business, said the cost of health insurance remains the No. 1 issue facing small business. "You're always skeptical about the really good insurance deal,'' he said. "Some of them are too good to be true.''
Some states have been aggressive in uncovering the scams, while others have been less vigilant, Kofman added.
Both Kofman and Oxendine said consumers buying new health insurance should check with state insurance departments to determine whether an insurer is authorized to sell policies in the state.
Copyright 2003 The Atlanta Journal-Constitution