Avoiding Insurance Fraud

There are a lot of health insurance scams out there. Not only must small business owners be concerned with the cost of a group health insurance policy, but they must make sure it’s a legitimate plan, says Walter A. Bell, commissioner of the Alabama Department of Insurance and a former president of the National Association of Insurance Commissioners (NAIC). According to a 2004 United States General Accounting Office report, unauthorized insurers sold coverage to at least 15,000 employers between 2000 and 2002. Here’s how to reduce your chances of falling victim to one of them.

Make sure company is licensed. An insurer must be licensed to sell health insurance in your state. Check

with your state insurance department before buying a group policy and find out whether any complaints have been lodged against the insurer, Bell advises. The NAIC Website (www.naic.org) has links to state insurance department sites.

Check your agent’s background. Ask for references from other businesses the agent has done business with and take the time to check those references out.

Beware of unusually low prices. Always comparison shop, Bell says. If one insurer’s rates are noticeably lower than the others, view that as a red flag. Contact your state insurance department to make sure the offer is as good as it looks.

Check the insurer’s financial strength. Even if you find that an insurer is legitimate and not running a scam, you don’t want your employees to be insured by a company that’s in danger of going out of business. Check with ratings agencies such as Moody’s Investor Services and Standard & Poor’s to make sure the insurer you go with is financially sound.