Dishonest telemarketers are selling fake health insurance, leaving Minnesotans in the lurch

Pretending to be government-sanctioned. Misrepresenting contract terms. Ducking demands for refunds. Selling plans under fake names.

These are some of the bare-knuckle tactics telemarketers use to sell limited health benefit plans deceptively marketed as full health insurance coverage.

State officials say vulnerable Minnesotans are among those being taken advantage of, as regular health insurance costs mount and a rising number of residents without coverage look for more affordable options.

“It’s definitely a trending issue in the insurance space,” said Sara Payne, assistant commissioner for enforcement at the Department of Commerce. She said health insurance scams can leave people believing they will be able to afford a doctor visit or hospital stay because they have health insurance — when they really don’t.

“Consumers usually don’t find that out until a bill arrives at their front door,” she said.

State insurance regulators this week unveiled the latest legal action against a company falsely telling consumers its products are health insurance in Minnesota. It’s at least the fifth time in the last two years locally, as investigators and experts say scams remain common and more may be on the horizon.

These companies are selling what’s called limited benefit plans, which can be legal as a type of supplemental insurance but do not meet the standards to be listed on an Affordable Care Act marketplace, like MNsure, or receive government subsidies. And providers of these plans cannot misrepresent their offerings — which may cover partial hospital bills or specific diseases — as major medical insurance.

The key difference is that full insurance doesn’t place a low, arbitrary cap on the amount of care a beneficiary can get in a year. Limited benefit plans stop paying after a certain amount regardless of how sick a person is, leaving some critically ill patients with the illusion of insurance.

Such limited benefit plans are becoming more permissive under the Trump administration, which views the plans as beneficial because the premiums can be lower, said Stephen Parente, a finance professor with the University of Minnesota. He said regulatory changes still come with safeguards to prevent fraud.

Some of these plans offer savvy consumers an option to buy limited benefits and potentially save money, Parente said.

“If, on the other hand, someone’s not that savvy, they don’t read this thing very effectively, or it’s sold to them in a high-pressure way, they could be misled,” he said. “They think it’s comprehensive health insurance and in reality it’s more limited.”

State investigators — and in at least one case, federal prosecutors — have zeroed in on limited benefit plan companies accused of lying to consumers, using aggressive sales tactics and flouting state laws. Officials have heard from consumers who pay hundreds of dollars per month for plans they were convinced amounted to full health insurance, but were not.

In its latest enforcement action, the state Commerce Department fined a now-defunct company called Seguro Medico LLC, also known as Quick Health, $150,000. The company faced regulatory scrutiny in other states and the federal Department of Justice brought a criminal case involving a few of its leaders, three of whom pleaded guilty to wire fraud, including its owner.

Last month the Commerce Department warned consumers about another limited benefit company, Florida-based Innovative Partners, which the Federal Trade Commission shut down this spring under an emergency court order alleging widespread deceptive business practices. The company is fighting the federal government’s case in court.

And late last year, Minnesota took action against Texas-based Strategic Limited Partners, accused of deceptive tactics that left one Minnesotan with about $40,000 in medical debt. In that case, Payne said, the business falsely advertised itself online as being part of MNsure, and people believed they had purchased a bona fide health insurance plan.

There have always been some “fly-by-night” folks in the health care business, said Mike Porter, a University of St. Thomas marketing professor with expertise in health care business communications. Today, he said, there is greater access to data that dishonest marketers can use to target people who may be in a vulnerable group.

One telltale sign of a bad actor is getting trapped on the phone.

“The harder the sell, the more I would question it,” he said.

Experts cited out-of-state cold calls, over-the-moon promises, and demands for quick decision among other red flags.

Spikes in bad actors pitching limited benefit plans often track disruptive moments for the U.S. economy or around health care, like the COVID-19 pandemic, said Jennifer Sullivan, senior policy advisor for insurance markets and regulation at health care consumer advocacy group Families USA .

Sullivan said this year’s expiration of enhanced subsidies for Affordable Care Act plans, combined with premiums going “through the roof,” presents another opportunity for people to be deceptively sold limited benefit plans.

“It’s another perfect storm,” she said.

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