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Insurance scams flourishing, says Better Business Bureau

In the midst of a tight economy and the wake of the new national healthcare reform bill, state and federal regulators are warning about a surge in healthcare-related scams.

The Better Business Bureau of Minnesota and North Dakota (BBB) advises consumers to do their research before signing up for insurance coverage, because their personal and financial health is on the line.

According to an October 2009 survey conducted by the Coalition Against Insurance Fraud, 57 percent of state fraud bureaus reported a higher incidence of health insurance fraud in 2009 compared to the previous year. The increase was largely attributed to "unauthorized entities selling fake coverage" and "the rise of medical discount plans."

"Navigating the healthcare system can be a tricky maze and coordinating your physicians, prescriptions and insurance coverage isn't always easy," said Dana Badgerow, president and CEO of the BBB. "One of the first steps to finding healthcare services that are a good personal fit is to start with a provider you can trust."

Companies such as HealthcareOne/Elite Healthcare, Consolidated Workers Association, and Smart Data Solutions/American Trade Association, have all recently come under fire from state regulators for peddling worthless coverage or discount medical plans - instead of actual insurance - to thousands of consumers.

Additionally, the new healthcare reform bill quickly sparked new scams; shortly after it was signed into law, the U.S. Department of Health and Human Services issued a warning to consumers to beware of health insurance offers claiming to be part of new federal regulations. For example, in Missouri, the state insurance director warned that a door-to-door salesman was claiming to be a federal agent selling insurance under the new law.

The BBB recommends taking the following steps when shopping for health insurance coverage to avoid getting ripped off:

Research the company with the BBB. Always check out the insurer's BBB Reliability Report online at Reliability Reports are available for free and will tell you how many complaints the business has received, whether there has been any government actions brought against the business, as well as the company's overall rating with the BBB.

Confirm the company is licensed with the state insurance commissioner. Each state has a department devoted to regulating insurance companies. Make sure the insurer is licensed to operate in your state. In Minnesota: In North Dakota:

Read the fine print carefully. Make sure all verbal commitments are in the fine print. Don't just take the company's word for it. Also, confirm with your pharmacist and doctor that they accept the plan you're considering.

Recognize the difference between insurance and discount medical cards. Some consumers purchased what they thought was health insurance but was actually a discount medical card that could only be used to get reduced rates at limited doctor's offices and pharmacies. Make sure you're purchasing insurance coverage and not just a discount medical card.

Beware of copy cats. Some phony insurers will go by a name that is similar to a trusted company. Confirm that you're really dealing with the right company that has a good reputation.

For more advice on finding healthcare companies and services you can trust, visit

The mission of the BBB is to promote, through self-regulation, the highest standards of business ethics and conduct; and to instill public confidence in responsible businesses through programs of education and action that inform, protect and assist the general public.

Contact the BBB at or 1-800-646-6222.