Monday, January 16, 2006

Sick Find Their Insurance Doesn't Exist; Regulators Shut Down Dozens of Insurance Companies Deemed Fraudulent

ABC News
Sick Find Their Insurance Doesn't Exist
Regulators Shut Down Dozens of Insurance Companies Deemed Fraudulent

Jan. 15, 2006 — - Zoraida Gonzales was frightened to learn she had breast cancer, but thought the one thing she could count on was her medical insurance.

"When you have cancer or some other deadly disease, all you can do is trust -- trust that things are going to work out," she said.

Gonzales thought she had full health insurance. While working at a human resources firm in Denver, she always paid her premiums. But halfway through her cancer treatment, the doctor's office told her that her insurance company didn't exist.

"It's painful," she said. "It just hurts."

As Americans struggle with growing health care costs, many will do anything to get insurance coverage, making them easy targets for sales pitches from shady health plans. While health insurance scams are nothing new, regulators say operators are more sophisticated and increasingly national in reach.

"Health insurance scams are a huge problem," said Mila Kofman of the Georgetown University Health Policy Institute. "We've seen huge increases in health insurance premiums, and that makes consumers very desperate for affordable alternatives."

Over the past five years, state and federal regulators have identified more than 150 fake health insurance companies and have shut down more than 50 of them. Beyond that, there isn't much they can do. The victims often are stuck with the costs.

'It's Very Hard'

Gonzales now is in remission, but she owes more than $100,000 in medical bills.

"Just to be afraid they're going to come knock on your door and put a lien on your home and try to take things away from you because someone cheated you out of something?" she said. "It's hard. It's very hard."

The U.S. Department of Labor shut down Gonzalez's insurance company, Employers Mutual of Nevada. And two months ago, its principal operator was convicted of conspiracy and fraud for bilking nearly 20,000 victims out of more than $20 million in unpaid medical bills.

Gonzales wishes she had done more homework about her insurance options. She's praying she'll figure out how to pay her bills.

"I have no way," she said. "There's no way in the world I could ever pay that money."

The Department of Labor has brought a civil case against Employers Mutual. Until the case is resolved, a federal judge has put an injunction against debt collectors from seeking payment from the victims.

But there is no guarantee Gonzalez won't be held responsible for at least part of the debt.

Check Your Provider

When consumers are looking for new health insurance, experts say they should make sure …

that the insurance company is licensed in their state.
to be skeptical if insurance premiums are much lower than what they are used to.
to be wary of health plans that eagerly accept people with preexisting medical conditions.

ABC News' Gigi Stone and Kathleen Hendry originally reported this story for "World News Tonight."