Clark Howard's Tips

January 23, 2008

There are a lot of pseudo health insurance companies out there selling fake plans to employers and individuals. The Wall Street Journal reports that some 200,000 businesses have been taken in by these kinds of rip-offs.

Small businesses crushed by high premiums are very susceptible to the lure of cheaper health care. But when somebody gets sick, the insurance card comes back as a fake and all the bills go unpaid. This has been happening in state after state.

Insurance is regulated by the states, not the feds, so the rip-off artists can just bounce around from state to state pulling their scams. What do you need to know to stay safe?

First off, be wary if you get a pitch for a great deal with drastically lower premiums. But don't let your skepticism stop there. Contact your state insurance department and ask if a prospective company is licensed to do business in your state. Make sure the name matches exactly because sometimes the rip-off artists will use a name that's very similar to that of a legitimate business.

Seniors also have to be especially careful of fake prescription plans. Once again, call your state insurance department to verify if a health insurance salesperson represents a legitimately licensed company. Preventative steps are the best medicine for your wallet.

Consumer advice courtesy of