Over 100,000 households have been scammed by phony health insurance plans, leaving them with massive bills and little to no coverage. Learn the red flags, how these scams operate, and how to protect yourself…
In any of our Scam Watch columns, we highlight a simple yet crucial fact: You are your first line of defense. A sound, inquisitive, and cautious mind can help cut their efforts down to size. Regulators, police, and watchdogs are there to help – but it’s your personal vigilance that’s the most effective safe guard. With a proactive, prudent approach to any transaction, especially an unfamiliar one, you gain the confidence you need to make an appropriate decision that’s good for you and your family.
With that in mind, we’ll discuss today’s story. This time, targeting people searching for health insurance (and failing to deliver).
Who can sell health insurance? Anyone, apparently
This week, we’re shining a light on a trend that’s cost over 100,000 American households more than money – it’s cost them peace of mind. It’s a lesson in the power of critical thinking, study and understanding before making a purchase.
Bloomberg recently uncovered how unscrupulous salespeople have been selling bogus health insurance plans. These plans are pitched as legitimate, complete with promises of great coverage and best-in-class care. But in truth, they’re more illusion than insurance, leaving families in the lurch.
To cut Bloomberg’s very long report short, more than 100,000 American families have been happy to purchase “health insurance plans” being sold by… whoever is good with the phone, it seems:
But because the plans are backed by obscure companies with names like Socios Buenos and Vitamin Patch, not by insurance carriers, it’s unclear who, if anyone, has the authority to regulate them.
This is apparently tied to a conflict between the Republican and Democrat parties over how health insurance should be sold and regulated. In the meantime, there’s no one protecting families.
Healthcare hustlers
The process is pretty straightforward. Here’s a thumbnail sketch:
The plan Strohmenger and his wife, Sarah, ended up buying from one of those salesmen sounded like normal health insurance, they say. They got the impression that it covered all the basics, including hospitalization and emergency-room visits. The telemarketer even promised, they say, that it would cover the pricey specialist monitoring Joe’s benign brain tumor.
Promises of great things come first – don’t they always?
But after paying $8,734 for a year’s coverage, the Strohmengers learned the plan didn’t include those things. In fact, it was so bare-bones that selling it in the U.S. would normally be illegal.
They are then stuck with not only a plan that they’re paying big money for, but also healthcare bills that can undermine a household’s financial stability.
Without meaningful coverage, the Strohmengers started avoiding medical care. Joe, who’s 40, skipped visits to the tumor doctor. Sarah, 39, tried and failed to get a refund. When they contacted the New York state insurance regulators, they said they were unable to help.
More than 100,000 American households have been through this health insurance scam in recent years, according to the Bloomberg report.
What can we learn from their mistakes?
We need to ensure we understand what a health insurance company is. And just how they fit into the healthcare regulatory landscape.
The article above details how the “health insurance plans” were provided by a company called Outreach Data Partners LP, which is – well, let’s just say deliberately vague and low profile. Not a brand you recognize and have happy memories of.
Over 10 companies claiming to employ 30,000 people in reality share a single UPS mailbox. In other words, they’re fake companies. However, their profit margins must be pretty great! The more of the report you read, the harder it is to believe that this kind of “business model” is allowed in the U.S.
Because these companies are operating within a regulatory gray area, there may not be recourse for those who realize (too late) that they’ve been exploited.
Here’s the good news: You can protect yourself and your family
If you’re ever unsure whether an insurance offer is real, remember: Knowledge is power. A few simple steps – like researching the company’s name, checking for real testimonials, and verifying it’s licensed – can keep you safe.
Many of the families Bloomberg interviewed followed a similar pattern, starting with a need rather than with research and education. They searched for a bargain rather than a reputable vendor.
To tell the truth, I can’t really blame them! Health insurance can be incredibly expensive, especially to people with specific needs, costly medications or frequent trips to a specialist. I get it. Due diligence, the time to research and study a company and their benefits before reaching out to them? Not how most people want to spend their Sunday afternoons!
Remember, though, big decisions require due diligence, study and understanding. Without them, you’re learning as you go – great for some experiences (exploring a new city or a new hobby), less than optimal for others. It’s possible to discover a reputable health insurance provider by chance.
Performing this due diligence might take a few hours over a day or two. Yes, time is money – but think of what you’re saving! Many Americans who don’t perform their due diligence, study and understanding up front incur tens of thousands of dollars of expenses they didn’t plan for.
Should you need health insurance, instead of searching for “cheap health insurance plans,” a better query might be “how does health insurance in the U.S. work,” followed by “who are the top U.S. health insurance providers.” Then, perhaps, searching the company’s website directly for affordable insurance plans.
Research the company: Make sure it’s a real company, licensed in your state.
Compare coverage carefully: If it sounds too good to be true, it probably is.
Seek trusted resources: Sites like the National Association of Insurance Commissioners (NAIC) can confirm whether a company is legitimate.
Ask questions: Be the squeaky wheel! Clarify vague promises with definitive statements – and get everything in writing.
Once you’ve verified that the company is legitimate, well-rated, with its own website and plenty of testimonials, you can move forward with confidence that you’re working with a legitimate vendor.
Yes, this approach requires more effort! Prudence always does. And it’s also much, much safer than taking your chances on the top search result.
Final thoughts: Confidence through caution
Health insurance is vital – especially if you have unique health needs or concerns. It’s easy to understand why people are eager to secure a good deal. But remember: the best defense is an informed, educated and deliberate choice. Taking a little extra time for due diligence and study can save you thousands along with the gift of peace of mind.
Knowing what to look out for is key to defending against most scams. To help you detect and avoid financial scams, Birch Gold Group has pulled together an extensive resource guide that is now available on our website. The Birch Gold Group Scam Protection Resource Guide helps you identify warning signs and provides you with tips on how to avoid fraud.