Health Care Insurance Scams Rise as Layoffs Leave Workers Uninsured

Days away from having a pacemaker implanted, Bob Harper got the worst news imaginable from Oklahoma insurance regulators: the health care insurance plan that he had purchased when he lost his job as a real estate agent was nothing but an elaborate fraud.

Harper, who lives in a suburb of Oklahoma City, had checked out his insurance provider with doctors and pharmacists, and had already had a few small claims paid out. But after the regulators called, he was convinced that the suspected swindlers would hardly pay out the thousands of dollars for major surgery, and wondered, late last year, if his time had come.

“I was freaking out; I thought to myself ‘I’m dead,'” Harper, now 63, said in an interview with The Fiscal Times. “I need an operation or I’m dead.”

As Harper’s health declined, he learned that his situation was hardly unique. Authorities in over 25 states are investigating his insurance company, American Trade Association (ATA), and have uncovered what they believe is a deep well of scams that ensnared an estimated 12,000 people who paid about $14 million in premiums. ATA and its lawyer did not respond to repeated requests from The Fiscal Times for comment.

Authorities across the country are now trying to shut down ATA, which attracted clients by advertising on Internet sites and sending blast faxes to workplaces. The company was able to avoid suspicion in part by covering some expenses, like prescription drugs, but not covering the cost of more expensive medical procedures, according to authorities. A number of state investigators have also ordered Consolidated Workers Association and HealthcareOne to cease operations because of similar frauds.

That so many people fell victim to the scam is hardly surprising, experts said. A searing recession left nearly 10 percent of the American workforce unemployed, including Harper, at a time when health care costs continue to soar, creating fertile ground for swindlers. “These scams began to spread as the economy grew worse,” said James Quiggle, a spokesman for the Coalition Against Insurance Fraud, a consumer advocacy group. “It is likely that the companies were exploiting that perfect storm,” he said, adding that ATA’s unlawful activities were only “the tip of the iceberg.”

A coalition survey of state insurance regulators last fall reported 38 percent of state insurance bureaus surveyed found health insurance fraud was “much higher” than in the previous year, while another 19 percent said it was “slightly higher.” The rise in bogus health plans was “greater than any category of insurance fraud,” the coalition said.

Authorities Expect Worse

The new health care reform law will require individuals to carry health insurance beginning in 2014, and Kathleen Sebelius, the secretary of Health and Human Services, has warned authorities about a wave of fraudulent sales pitches. Already, reports are trickling in to state insurance commissions, the industry’s primary regulators, about con artists knocking on doors and urging the uninsured to buy a policy that they “must” have now.

Kim Holland, the Oklahoma insurance commissioner whose office has been pursuing ATA since last year, said vigilant enforcement will be the only way to stop such scams. “I don’t know that you can pass enough laws to prevent bad people from doing bad things,” said Kim Holland, Oklahoma’s insurance commissioner. “That’s what bad people do.”

But the “bad people” in this case managed to look pretty good up front.

Glenda Hey, 60, got a blast fax in early January 2009 at the Oklahoma City police department where she works part time. Her husband’s company insured her for a premium of more than $500 per month, but the fax from ATA said a policy would cost only $314. “I picked it up, took a look, and thought to myself ‘Hey, this looks pretty good,'” Hey said in an interview.

Hey was relieved she had the new policy when, in March 2009, shortness of breath and bad chest pains put her in the hospital for several days, where she underwent a battery of tests. She later recovered, and never saw the $32,000 in bills that went to ATA, until a few months later, when the hospital told her they were unpaid. She called ATA’s headquarters in Springfield, Tenn., to make sure the company had received the bills. Hey faxed the bills, and called to check 15 minutes later to see if they had arrived. No response. She sent them by registered mail. No response again.

Finally, last August, she contacted the Oklahoma Insurance Department, and found out ATA was being accused of fraud. “I’d like to go see these guys in person and ask them how they sleep at night after taking money from people like this,” she said.

State authorities first began receiving consumer complaints about ATA and an affiliated company, Smart Data Solutions, in 2009. By March and April of this year, the authorities had enough information to issue case-and-desist orders, which required the companies to close their doors. Regulators in Tennessee raided and seized ATA’s headquarters, which is owned by Bart Posey.

Posey’s lawyer, Nader Baydoun, has denied accusations of wrongdoing by Posey and ATA, and is fighting Tennessee’s bid to liquidate the companies and pay off policyholders with the proceeds. He insists that ATA sold legitimate insurance that was underwritten by Serve America Assurance, the Bermuda-based subsidiary of Beema, a Pakistani insurance company. Baydoun did not respond to repeated requests from The Fiscal Times for comment.

Authorities are still somewhat unclear whether Beema and Serve America are legitimate operations. Oklahoma officials said they have received one letter from Beema confirming it served as ATA’s underwriter, and another denying any links to them.

“I have a series of very convoluted flowcharts,” Richard McCaffrey, compliance and enforcement council for the New Hampshire Insurance Department, which has also acted to shut down ATA in its state. “They involve a lot of people and change company names all the time.”

As authorities struggle to shake loose what money they can, ATA’s victims are trying to find their way in the aftermath. Glenda Hey is applying to be treated as a “hardship case” at the hospital where she was treated, since she said she has “no hope” of paying off $32,000 in bills.

Bob Harper was luckier. For months, he endured fainting spells and days in bed because he needed a pacemaker he could not afford.

But late last month, Blue Cross and Blue Shield of Oklahoma, which insured him at his old job, said that Oklahoma’s investigation of ATA had proven he attempted in good faith to get other insurance. It has agreed to re-admit him to the plan and cover his pre-existing conditions – and get him the pacemaker.

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