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Issue Brief
October 2010

Buyer Beware: Unlicensed Insurance Plans Prey on Health Care Consumers

Three companies have been liquidated by court order for scamming health care consumers. Insurance departments in some states have found that these companies sold unauthorized, unlicensed health insurance products to consumers and failed to pay claims. These companies collected premium payments from people, and gave them nothing in return. When these consumers got sick, they were left with thousands of dollars in unpaid medical bills.

These scams are unfortunately common in an economic recession because people are desperate to buy affordable coverage. Consumers think they will get a better deal if they purchase insurance through an association, but regulation and oversight of this coverage represents a major challenge to state insurance departments. As a result, consumers are not always protected when they buy these health plans.

Until the Affordable Care Act is fully implemented in 2014, consumers who are desperate for help will remain vulnerable to insurers. Therefore, it is important that state and federal agencies tell consumers to use only trusted government websites to learn about health insurance. Consumers should also check with state and federal regulators to make sure that the insurance products they buy are authorized.

Learn more about how the Affordable Care Act’s consumer protections help prevent scams like this from happening.