Consumer Federation of California

The national health reform law is expected to open the door for identity theft and insurance scams when millions of uninsured Americans begin enrolling in coverage this fall, officials and advocates warn.

The Federal Trade Commission said dozens of consumers have reported fraud since last summer’s Supreme Court ruling upholding the law, and officials predict widespread abuse when enrollment begins in October.

One scam already making the rounds involves a caller promising to send a healthcare card if the person reveals personal and financial information. There are also false enrollment websites, and at least one company has used the health reform law to promise huge savings on medical costs and swindle consumers into buying fake insurance.

“Fraudsters read the paper too, and where there is confusion in the marketplace, they see opportunity to make money,” said Lois Greisman, associate director of the commission. “This is unfortunately going to be an area where there is confusion.”

Greisman said her staff was ramping up for the Affordable Care Act, which takes full effect in January. “We have lots of eyes on this,” she said.

The Coalition Against Insurance Fraud, a Washington-based nonprofit, has issued a national alert and has been working closely with the federal government and the media to get the word out, said spokesman James Quiggle.

“The sea change in how America provides health insurance has created a breeding ground for so-called Obamacare swindles,” he said.

Under healthcare reform, millions of Americans who lack insurance will become eligible for Medicaid and subsidized coverage through state-based health exchanges. More than 2.6 million people may be eligible for subsidized coverage in California’s exchange, known as Covered California, and an additional 1.4 million low-income residents will be eligible for an expanded Medi-Cal program.

Federal and state health officials are directing consumers to the official websites — https://www.healthcare.gov and https://www.coveredca.com. The Centers for Medicare & Medicaid Services is also warning consumers not to disclose private medical or financial information in response to unsolicited calls, e-mails or visits and to beware of offers that seem too good to be true.

Those especially at risk for fraud are seniors, people who speak limited English and those who have never had insurance before. In California, large numbers of those newly eligible for insurance are Spanish-speaking.

“Language can create a special vulnerability,” said Maricela Rodriguez, program manager at the California Endowment, which has launched a Latino media campaign to help spread the word about how to enroll. “Addressing this with the Latino community is so important.”

There is also concern about the potential for fraud among those being hired by states to tell consumers about their options and potential tax penalties. Covered California plans to hire more than 20,000 enrollment counselors, many of whom are part of community groups.

Covered California officials said the counselors would attend training, agree to a code of conduct and undergo background and fingerprint checks. Field monitors will supervise their work, and secret shoppers will ensure their compliance.

But fraud is inevitable, said spokesman Dana Howard.

“There are going to be schemes and individuals who will attempt to deceive the consumer at every corner,” Howard said. “It is something we are analyzing on a daily basis — ways to minimize fraud and deception.”

Covered California leaders are holding town hall information sessions around the state, and officials are planning a coordinated outreach and enrollment campaign to begin later this summer.

But the California Department of Insurance has warned that there still weren’t enough protections for consumers. Insurance agents and brokers undergo a much more rigorous vetting process than will be required of the new staff.

“If someone is just careless with a consumer’s identity, that could cause all kinds of problems,” said Nancy Kincaid, spokeswoman for the insurance department.

Insurance Commissioner Dave Jones has written to Covered California urging officials to add more protections to prevent “criminals from becoming enrollment counselors and enrollment counselors from becoming criminals.” The department also has proposed that it be responsible for certifying and monitoring new workers.

Steve Young, senior vice president of Independent Insurance Agents and Brokers of California, agreed that there needs to be more oversight because the Covered California workers and community groups will have access to confidential and sensitive information.

“There is so much money on the table, especially in the first year,” he said. “It will bring people out of the woodwork to take advantage of the most vulnerable type of populations.”

Others have expressed concern about possible fraud in the material insurance companies will send to potential customers. State Sen. Ted Lieu (D-Torrance) has proposed legislation that would require the Department of Insurance to review insurance company mailers or solicitation brochures to ensure they are not misleading or deceptive.

“Many of these folks have never had insurance before,” he said. “They have no baseline to judge what is being pitched to them.”