2 posts tagged “association”

If you are a business owner, self-employed or an employee of a company that is not offering medical coverage though your employer, you may have to undertake the frustrating, daunting and time consuming task of purchasing health insurance on your own.  If this is the case, there are certain things that you can do as a consumer to ensure that you are purchasing the type of health insurance coverage you really need at a price you can afford.

When you purchase a health insurance plan, you must achieve a balance between four important variables; wants, needs, risk and cost, before you spend your money. Although you may “want” a health plan that offers you 100% coverage and a $5 co-pay for prescription medications, you may not “need” this type of health plan if you are healthy, take no medications and do not have any significant health related “risk” factors. Since a 100% health plan may “cost” significantly more than a health plan with 80/20 coverage, it may not be in your best interest to pay higher monthly premiums for coverage that you are not likely to use.

In addition to weighing the aforementioned key variables, it is also critical that you understand the limitations of your coverage. The following is a list of 10 key questions that you should ask your insurance agent, before making a decision to purchase a health insurance policy. 

1. What insurance company do you represent and are you a “captive” agent, “independent” agent or insurance “broker?” (e.g. A “captive” agent usually represents ONE insurance company and can usually only sell that company’s insurance products. An “independent” agent or insurance “broker” usually represents many insurance carriers and can sell a variety of insurance products.)

2. What is the plan’s calendar year deductible and would I have to pay a separate deductible for each family member if everyone in my family became ill at the same time? (e.g. The majority of health plans have a per person calendar year deductible, for example, $250, $500, $1,000, or $2,500. However, some plans will only require you to pay a 2 person maximum deductible each calendar year, even if everyone in your family needed extensive medical care.)

3. What is the plan’s coinsurance percentage and what dollar amount (stop loss) it this percentage based on?  (e.g. A plan with 80/20 coverage means you pay 20% of some dollar amount. This dollar amount is also known as a stop loss and can vary based on the type of policy you purchase. Stop losses can be as little as $5,000 or $10,000 or as much as $20,000. It is also important to note that some policies have NO stop loss.)

4. What is the plan’s maximum out of pocket expenses per year? (e.g. This expense is a total of all deductibles plus all coinsurance percentages plus all applicable “access fees” or other fees.)

5. What is the plan’s lifetime maximum benefit if I become seriously ill and does the plan have any “per illness” maximums or caps? (e.g. Some plans may have a $5 million lifetime maximum, but the policy many stipulate that there is a maximum benefit cap of $100,000 per illness. This means that you would have to develop many separate and unrelated life-threatening illnesses costing $100,000 or less to qualify for $5 million of lifetime coverage.)

6. Is the plan a schedule plan, in that it only pays a certain amount for a specific list of procedures? (e.g. Mega Life & Health & Midwest National Life, endorsed by the National Association of the Self-Employed, N.A.S.E. agents are  known for selling schedule plans.)

7. Does the plan have unlimited doctor co-pays or is there a limited number of doctor co-pay visits per year? (e.g. Many plans have a limit of how many times you can go to the doctor per year for a co-pay and, quite often, the limit is 2-4 visits.)

8. Does the plan offer prescription drug coverage and if it does what type of coverage? (e.g. Some plans offer prescription benefits right away, other plans will require you to pay a separate drug deductible before you can receive prescription medication for a co-pay. Today, many plans offer no outpatient prescription drug co-pay options and only provide you with a discount prescription card that gives you a 10-20% discount on all prescription medications.)

9. Does the plan have any reduction in benefits for organ transplants and if so, what is the maximum the plan will pay out for an organ transplant? (e.g. Some plans only pay a $100,000 maximum benefit for organ transplants for a procedure that actually costs $350-$500K and this $100,000 maximum may also include reimbursement for expensive anti-rejection medications that must be taken after a transplant. If this is the case, you may be required to pay for anti-rejection medication out of pocket.)

10. Does the plan have any separate deductible or “access fee” for each hospital admission or for each emergency room visit? (e.g. Some plans, like the Assurant Health’s “CoreMed” plan have a separate $750 hospital admission fee or “Access Fee” that you pay for the first 3 days of a hospital admission. “Access Fees” are in addition to your plan deductible. Also, many plans have benefit “caps” or “access fees” for out-patient services, such as, physical therapy, speech therapy, chemotherapy, radiation therapy, etc. Benefit “caps” could be as little as $500 for each out-patient treatment, leaving you a bill for the remaining balance. Access fees are additional fees that you pay per treatment. For example, for each outpatient chemotherapy treatment, you may be required to pay a $250 “access fee” per treatment. So for 40 chemotherapy treatments, you would have to pay 40 x $250 = $10,000.

Remember, your health insurance purchase is just as important as purchasing a house or a car, if not more important. So don’t be afraid to ask your insurance agent a lot of questions to make sure that you understand what your health plan does and does not cover. And, most importantly, read all of the “fine print” in your health plan brochure and when you receive your policy, take the time to read through your policy during your 10-day free look period.

Lastly, if you have any concerns about an insurance company, contact your state's Department of Insurance BEFORE you buy your policy. Your state’s Department of Insurance can tell you if the insurance company is registered in your state and can also tell you if there have been any complaints against that company that have been filed by policy holders. If you suspect that your agent is trying to sell you a fraudulent insurance policy, (e.g. you have to become a member of a union to qualify for coverage) or isn’t being honest with you, your state’s Department of Insurance can also check to see if your agent is licensed and whether or not there has ever been any disciplinary action previously taken against that agent.

In today's fast paced world, business owners don't often have the time to thoroughly check out the companies they rely on to provide goods and services. In many cases, a determination of product/service quality can be made at the time goods are delivered or services are rendered. If goods or services do not meet expectations, there is often an immediate remedy available.  For example, poor quality goods can be shipped back to the supplier and/or payment for services can be withheld until services are satisfactorily rendered.

Unfortunately, business owners do not always purchase items that are tangible items, in the sense that they can immediately determine the quality of the goods and/or services at the time of purchase. One example of such a purchase is health insurance.  Since health insurance is not usually used immediately after purchase, the quality of care or the legitimacy of the policy may not even come into play until the business owner, or a family member, actually needs to have medical treatment. This is one of the primary reasons that many companies, often appearing legitimate, can get away with selling bogus health insurance coverage to unsuspecting business owners.

In most cases, fraudulent health insurance policies are sold to business owners by telemarketers or "agents" through bogus Associations and Unions. In that, the buyer must join a professional and/or trade association or become a union member to qualify for health insurance. In fact, in a study published by the U.S. General Accountability Office (GAO) in 2004, the GAO found that association schemes ranked at the top of the marketing methods followed by bogus health insurers.  According to the report, "Employers and Individuals Are Vulnerable to Unauthorized or Bogus Entities Selling Coverage, between 2000 and 2002, the U.S. Department of Labor and state insurance regulators identified 144 unauthorized entities selling health insurance unlawfully. These entities defrauded 15,000 employers and more than 200,000 policyholders out of $252 million."

However, it is important to mention that many individual and group health insurance products are endorsed by reputable Associations, such as the ARRP and the American Bar Association and, many reputable Unions, such as the AFLCIO and the Teamsters.  These organizations have long been recognized for bringing a common class of professionals or citizens together for other purposes that have very little to do with health insurance. Membership commonly includes a wide range of other benefits in addition to discounted health insurance. Typically, the organizations have a governing organization, a constitution and bylaws, a set of officers, voting rights, regular membership meetings and a professional code of conduct. 

Unfortunately, most individuals do not find out that they were making hefty monthly payments or premiums to fraudulent Associations or Unions until they have a severe condition that requires medical treatment. Usually, it isn't until after they receive treatment that they receive notice from their medical provider that the claim that was submitted to the insurance company was denied and that all the medical charges that were incurred are now their responsibility.

Often, the scheme starts when business owners are contacted by telephone or approached by someone who claims to represent a certain, official sounding, Association or . The business owner is then informed that if s/he becomes a member of the Association or joins the , s/he could qualify for a low cost group or individual health insurance plan. Typically the Association or is promoted to represent self-employed individuals and small business owners. The low cost health insurance is usually presented as one of the many "perks" that the business owner can qualify for, in addition to many other "member" benefits, like discounts on other services, such as dental, eyeglasses, office supplies, hotels, rental cars, etc. 

In many instances, these bogus companies involve licensed health insurance agents to sell their fraudulent health insurance products. Sometimes the "agents" know the products are fraudulent, other times, the "agent" also falls prey to the scheme. 

Often, the schemes prey upon consumers who have been previously declined insurance coverage or suffer from a pre-existing condition. Since these consumers have very limited options to purchase private health insurance coverage, the benefits of an Association or Union membership that offers health insurance coverage for a "membership fee" or "union due" is enticing. To the unsuspecting consumer that has a pre-existing medical condition or is paying high premiums for coverage, the "membership fee" or "union due" is a small price to pay for what they believe will be a quality health plan that provides "guaranteed" coverage with no "pre-existing condition exclusions" and no "waiting periods."

In many circumstances, the print materials that are left with the consumer are very well designed, however, the majority of the time, the language in the "health plan brochure," if there is one, is very unclear. The literature may name the entity that is authorized to act as the health plan administrator of the plan, but neglect to name the actual insurance company that is providing the health insurance coverage. Unfortunately, it is often difficult for the consumer to separate the illegitimate companies selling official sounding health plans from the legitimate ones. Typically fraudulent health plans have many commonalities. 

Here are 10 "Red Flags" that may indicate health insurance fraud:

1. The "agent" is not a licensed insurance agent but an "enrollment" or "membership" coordinator.
2. The term "discount plan" is written in the product literature, but the term health plan, health insurance or policy is frequently used by the plan promoter. Discount plans often provide nothing more than a discount for medical services, such as prescription medications, eyeglasses, dental, etc.  These plans are not designed to offer major medical health insurance coverage.
3. The official sounding "Association or " is one that you have never heard of before.
4. The plan is referred to as an ERISA plan. The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that allows employers to set up employee benefit plans for employees and their dependents. ERISA plans are not subject to state regulation and are not regulated by the state insurance commissioner.  ERISA plans are normally not sold as health insurance, but are instead, established by employers, unions or groups acting on behalf of employers.  Therefore, unsuspecting buyers believe these plans actually offer health insurance coverage, when if fact, they do not.
5. The buyer is told that the "membership fee or union dues" includes the health insurance premium, but there is no mention of the word "premium" in any of the plan literature.
6. The plan offers "guaranteed" insurance coverage with no exclusions for "pre-existing conditions" and no "waiting periods."
7. The plan is significantly cheaper in price than other health insurance plans.
8. The term "reinsured" is used in regards to the plan. Reinsurance is something insurance companies buy to protect themselves against their own risks. It is insurance for insurance companies. Licensed insurers rarely have their agents mention any of their reinsurance arrangements during a sales presentation.
9. If the Association or Union is comprised of members from all walks of life and/or requires its members to state that they belong to a certain trade, class or group of professionals that they have no affiliation with, for example, the Association or Union is said to be comprised of "Food and Beverage" workers, but "Florists" and "Machinists" are allowed to enroll as members.
10. If the Association or Union is said to have a special arrangement with a health insurance company, a plan administrator or another third party that has designed the plan using a legal "loophole" that allows members to purchase health insurance at a discounted rate or to purchase a individual or group health insurance policy.

So how can you protect yourself from falling victim to a fraudulent insurance scam?  Make sure you contact your state's department of Insurance to determine if the health insurance company and the third-party administrator are licensed to do business in your state and make sure that the "agent" selling the plan is a "licensed health insurance agent."  Additionally, make sure that the health insurance company has been approved to sell the particular policy that is being offered.  Since it may be difficult to tell if fraud is involved, always put off buying your insurance policy until you have had the opportunity to perform your own due diligence.