Phony health insurance

John Morrison, Montana’s insurance commissioner, heads a nationwide committee on health insurance regulation.

Typically promoted as "union plans" or "association plans," these fake programs generally promise very low rates and say they do not need a state license because they are regulated by the U.S. Department of Labor under the pension law known as ERISA. Not so.

The plans often use a small portion of premium dollars to pay some of the least-expensive claims. Patients and doctors are stuck with the unpaid bills and, possibly, a damaged credit rating.

For example, Employers Mutual LLC and the National Association for Working Americans sold nonexistent health insurance to more than 50,000 workers and family members, according to John Morrison, the Montana insurance commissioner. The workers and their families were left without health insurance and with an estimated $65 million in unpaid medical bills. Employers Mutual LLC operated in every state; the National Association for Working Americans, in 48.

A close cousin of the fake health-insurance-policy scam is the fraudulent "discount health card." An e-mail or fax sales pitch offers "health care for the entire family" medical, dental, and prescription benefits, with no exclusions or limitations. The catch, says Morrison, is that at best, the program may provide only a small discount on some services. At worst, no health-care provider will accept the card because the so-called "company network" does not exist. Some states, including Montana and Florida, have enacted legislation to regulate the cards, but many states do not offer the same protections.

If you have signed up for an association plan on your own or through your employer, or you are thinking about doing so, follow these tips:

• Call your state department of insurance to see whether a plan you’re considering and the agent selling it are licensed. If they aren’t, don’t sign up.

• Be skeptical if premiums seem low or if the plan offers coverage without concern for pre-existing conditions. Also beware of pitches that avoid the word "insurance" or the use of insurance terms.

• If the company or agent will not release a list of providers until after purchase, consider the offer a scam.