While the days of junk faxes should be nearing an end, yet another story surfaces that demonstrates the deceptive side of the practice is still alive and, unfortunately, profitable.

In May 2010, the Oregon Insurance Division (OID) reported that some Oregonians had been solicited by fax to buy “affordable health care” for $369 for an entire family. Even though that sounded way too good to be true, nearly 400 unsuspecting folks sent money to the companies offering the coverage. Average annual family premiums, at least in Oregon, are about $12,000 according to the OID. Of course, that is a pre-reform average, and premiums likely will start increasing in advance of federal insurance mandates.

It took an investigative effort by the Tennessee Insurance Division (TID) to shut down the companies, but not before people from Oregon had sent in their premiums. The TID investigation uncovered boxes of unpaid medical claims. While this practice had been going on for a while, and was fairly sophisticated, the concept of selling health insurance coverage and collecting premium money without paying any claims may become more commonplace.

Predictably, in the wake of the March 2010 passage of federal health insurance reform, many opportunists sought to take advantage of the confusion associated with the upcoming changes. State insurance departments have started alerting their residents to bogus sales practices such as offering a product called an “ObamaCare Insurance Policy.” There is no such policy. The message to consumers should be buyer beware, but due to the confusion created by the complexity of health insurance reform, many people are likely to fall victim to health insurance scams.

So, a couple rules of thumb: (1) If it sounds too good to be true price-wise, it probably is a scam; and (2) For consumers and providers, if you see a commercial insurance product that you have never heard of before, verify that the company offering the product is licensed to do business in the state. Commercial health insurers are still regulated by state insurance departments, and each insurer must be authorized to do business in the state they are offering policies. For example, in Oregon, you can call the Oregon Insurance Division, and in Washington, you can call the Washington Office of the Insurance Commissioner.