Using Obamacare as bait, scam artists target consumers and business owners


Scammers in several states are trying to capi­tal­ize on confusion over the health care overhaul. (GASTON DE CARDENAS/REUTERS)
September 10, 2013

A number of health insurance scams have emerged in recent months as crooks try to cash in on confusion over the health care reform law, and some officials say they are bracing for more in the months ahead.

Most of the schemes target uninsured individuals and employers, many of whom will soon be required to purchase a minimum level of health coverage or pay a tax penalty. In some cases, scammers have set up bogus Web sites intended to look like the law’s new health insurance exchanges, where individuals and small business owners will be allowed to shop for coverage starting on Oct. 1.

Sites using the domains washingtonhealthexchange.com and mdhealthexchange.com have already been reported and taken down.

“These exchanges are designed for both individual consumers and businesses, so by definition, these fake ones are trying to lure both consumers and business owners into a trap,” Jim Quiggle, a spokesman for the Coalition Against Insurance Fraud in Washington, D.C., said in an interview.

So far, “scams specifically targeting businesses are in the minority,” Quiggle said, but he says he expects the incidence may pick up once the real health care exchanges open for enrollment next month — particularly because there is still so much confusion and misinformation surrounding the law.

In the last few months, several polls have shown that a large number of people still do not know exactly what the health law’s requirements entail, to whom they apply, or whether the legislation is still in effect. One by the Kaiser Family Foundation showed that 42 percent of people did not know the law still stands, with many believing it had been repealed by Congress or overturned by the Supreme Court.

“When you go out into the neighborhoods, many people still have no idea what the law means for them,” Michael Flagg, director of communications for the District’s Department of Insurance, Securities and Banking, said in an interview. “It leaves a lot of vulnerability.”

In threatening e-mails and phone calls, sometimes masquerading as government officials, some scam artists have offered to help individuals avoid tax penalties by signing them up for plans that meet the federal requirements.

Of course, in order to register, consumers and employers must hand over private health records and financial information.

In Maryland, scam artists have started calling residents claiming they need to verify Medicare ID and Social Security numbers for purposes associated with the health law, according to reports published by the Coalition Against Insurance Fraud.

In New York and Florida, meanwhile, scammers have been traveling door-to-door, asking whether individuals currently have health insurance. If not, some individuals have reportedly been threatened with prison time if they do not sign up for coverage on the spot, according to the coalition.

“Home-based entrepreneurs especially need to be mindful of strangers knocking on their doors with these insurance schemes,” Quiggle said.

So far, similar schemes have been reported in more than 20 states.

“If somebody calls and offers to sign you up for $500, whether you’re a business owner or individual consumer, you just have to hang up,” Flagg said, noting that the actual health insurance exchanges are not open for business yet.

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he runs the On Small Business blog.
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