Premiums for individual health insurance policies are enough to send a strapping person in his prime straight into shock. The state has set up a plan that guarantees health insurance to individuals and families not covered by an employer’s health plan. But, oh, the premiums.

Plans from Horizon Blue Cross Blue Shield of New Jersey which cover a parent and a child, for example, carry monthly premiums ranging from $1,919.59 to $6,073.09. Full, if somewhat confusing, details are available online at www.state.nj.us.dobi.

As a result of the cost of health insurance, the state’s division of banking and insurance has issued the following warning:

Small employers and consumers are seeking ways of finding healthcare coverage that is within their budget. Unfortunately, this environment creates a setting for scams in which criminals market various low-cost fraudulent health plans, often claiming that state insurance laws don’t apply.

These individuals and their associated companies recruit insurance agents to sell so-called “ERISA plans” or “union plans.” Claims may be initially paid by these fraudulent plans, however, in many cases people are left with no valid insurance coverage and thousands of dollars of unpaid medical bills, as the scam operators strip premium dollars and leave these fraudulent enterprises bankrupt. Additionally, there has been a proliferation of non-insurance products that are marketed as alternatives to traditional health insurance. While such plans may look like regular insurance, many come with significantly greater risks and fail to provide any savings in healthcare costs.

The division of banking and insurance warns consumers to watch out for these red flags:

Too good to be true. Coverage is offered at lower rates and with better benefits than can be found from licensed insurers — the offer is “too good to be true.”

Limited window to sign up. The agent or company tells you that this is a “one-time deal” or your “last chance” for this special savings.”

You are told that the plan is not regulated under state law.

You have purchased coverage and claims are not being paid.

A “union plan” is sold by an agent.

A “union plan” is available but no other traditional union benefits are present.

Evasive agents. The agent or company becomes evasive when you ask about state insurance licenses.

The agent or company insists on cash payments.

Personal information. The agent or company asks for detailed personal information that is not needed to write health insurance.

Insurance that isn’t really insurance. A discount program is a program under which a subscriber is able to access medical services or supplies at a discounted rate from participating providers, such as doctors and hospitals. While these products are sometimes marketed to look like insurance, they are not insurance programs. If you are not sure whether the product is insurance, you should ask whether a licensed insurance carrier is offering the product and verify this information with the insurance company.

If you do not have health insurance coverage in addition to a discount program, you can be left with a substantial liability for payment to providers. For example, a 10 percent discount applied to what generally would be $100,000 bill for medical services would still leave a person with a $90,000 liability. While some reputable entities offer discount programs, fraudulent operators are also marketing such services.

Before purchasing a discount program ask for a list of participating providers, contact each provider that you intend to visit, find out what the provider normally charges for the services you are interested in receiving, and make sure the provider offers the promised reduction in fees.

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