FTC cracks down on health insurance scams

Fake health insurers who may have defrauded tens of thousands of Americans have been targeted in a nationwide crackdown, the U.S. Federal Trade Commission and 24 states announced Wednesday.

The FTC and the states, which include Minnesota, filed 54 lawsuits or regulatory actions against companies selling "medical discount plans" alleged to be bogus, David Vladeck, director of the FTC's Bureau of Consumer Protection, said Wednesday at a news conference in New York. The plans, which Vladeck and state officials said were marketed to the estimated 47 million uninsured Americans, often provided no benefits.

The health care overhaul, signed into law by President Obama in March, has created the potential for fraud, Vladeck said, because the major provisions to extend coverage to at least 32 million people don't go into effect until 2014.

"I think the uncertainty about the benefits that will be available under the federal insurance program, and the fact it doesn't kick in until 2014, is giving scammers very fertile ground for this," he said. "They're trying to capitalize on the uncertainty."

Minnesota Attorney General Lori Swanson, who filed three cases against companies alleged to have sold fraudulent health benefit plans, said economic conditions also created the potential for scams. In her state, the number of uninsured people increased to 9 percent last year from 7 percent in 2007, she said at the news conference.

"We've seen a real spike in complaints, but I attribute a lot of it to economic problems," she said.

The FTC filed three lawsuits against closely held companies it alleges to have sold fraudulent discount plans. Vladeck and state officials said they don't yet know how many people may have purchased the plans but estimated the figure to be in the tens of thousands.

The plans are marketed over the telephone and through radio and television ads, the officials said. One company that the FTC sued, Health Care One LLC, claimed that its plan was health insurance endorsed by the federal government, Vladeck said, and used excerpts from an Obama health care speech to Congress in its ads.

"It wasn't health insurance," Vladeck said. "It wasn't endorsed by the federal government, it did not result in any savings, and it was not accepted by providers."