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Shady insurance agents preying on seniors, officials warn

Senior citizens who lose their Medicare HMO coverage now have something else to worry about as they shop for new health coverage: misleading sales pitches by shady insurance agents eager to line their pockets with commissions.

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Don't get snookered

If you are losing your Medicare HMO coverage, don't panic, says Joe Baker, executive vice president of the Medicare Rights Center. And certainly, he warns, don't be pressured into buying a Medigap policy too soon, as you'll only pay for coverage you don't need yet and you'll lose some important protections if you drop your HMO coverage prematurely.

Those protections include the right to buy a specified Medigap plan without coverage exclusions or higher premiums based on your health or claims experience, and in some cases the right to buy any Medigap plan of your choice. 

Protect yourself by taking a few basic precautions:

  • Know who is running a seminar about Medicare. If it's a private company, remember that its ultimate goal, Baker says, is to sell its products to you.
  • If someone tells you to sign a policy before you leave the seminar, refuse. Instead, offer to take the material home, where you'll be able to read it carefully.
  • Shop around. Although Medigap plans are standard in most states, premiums can vary widely.
  • If in doubt, call Medicare officials at (800) MEDICARE for advice or help.
  • Report suspicious agents to your state insurance department.

Check the official Medicare Web site for more information.

Federal officials have issued a letter to insurance commissioners in each state warning them that senior citizens are being tricked into dropping their HMO coverage early and buying supplemental Medicare plans, known as Medigap policies. Seniors who drop their coverage prematurely may lose important protections they'd otherwise have when joining a new Medicare plan this winter (see the sidebar for details).

"It has come to our attention that some insurance agents in several states are using high-pressure sales tactics, such as claiming that processing Medigap applications will take six months," says the undated letter, written in early September by Nancy-Ann Min DeParle, outgoing administrator of the Centers for Medicare & Medicaid Services (CMS), formerly the U.S. Health Care Financing Administration (HCFA), which oversees Medicare. "Some agents are running advertisements that mislead beneficiaries and encourage them to disenroll immediately from their managed care plans and purchase Medigap insurance. In fact, this claim simply is not true."

The CMS letter urges commissioners to educate agents whose deceptive practices result from "ignorance" and to discipline those whose sales tactics are willfully illegal. The letter did not identify any agents or insurers implicated in these schemes, and officials would not do so, either.

And although the letter does not name any states, several state and federal officials who did not want to be identified told Insure.com that problems with misleading sales practices were most prevalent in Maryland, Missouri, Pennsylvania, and Texas. Officials in those states deny that problems with misleading sales practices are unusually high this year.

Pennsylvania insurance officials, for example, have not received any written complaints and they have received just one phone complaint from seniors who said they were scammed, says Angela Yarbrough, a spokesperson for the Pennsylvania Department of Insurance (DOI). Still, officials there are investigating. "If it's happening, we want to make sure we put a stop to it," Yarbrough says.

"It's an ongoing issue," says Randy McConnell, a spokesperson with the Missouri Department of Insurance.

HMO "dumping" induces panic

As the annual summer rite of Medicare HMO "dumping" continues, worried seniors become easy targets for unscrupulous agents, officials say. More than 930,000 elderly and disabled Americans must shop for new health plans because they will lose their Medicare HMO coverage when 115 health insurance companies stop offering the plans on Dec. 31, 2000.

"That kind of anxiety can definitely be played on to induce panic buying."

Many of those who lose their HMO coverage likely will wind up enrolling in a traditional Medicare fee-for-service program. Because there are large gaps in traditional Medicare program coverage, seniors often buy Medigap policies from private insurers to obtain additional benefits, such as prescription drug coverage. Some insurance agents see this as an opportunity to use high-pressure sales tactics to convince unsuspecting seniors to buy a Medigap plan they don't need or before they need it. Agents benefit by receiving commissions, and insurers receive more premiums.

"Seniors are unsettled, and that kind of anxiety can definitely be played on to induce panic buying," notes Joe Baker, executive vice president of the Medicare Rights Center, a not-for-profit organization that helps older adults and disabled people find affordable health coverage.

Shady agents use misleading advertisements or target seniors who attend seminars seeking information about new coverage options, he says.

"If they go to a marketing seminar run by a private company, they have to understand what those seminars are all about," Baker cautions. "And they're about selling products."

Humana says seminars offer value

Private insurers say not all marketing and informational seminars should be regarded with suspicion.

Humana, for instance, is dropping Medicare HMO coverage for 86,000 seniors in several states and is conducting informational seminars about alternative coverage. Agents at those seminars sell Medigap plans through Humana's wholly owned subsidiary, The MarketPoint Agency. The agency is a brokerage originally launched a year and a half ago to sell long term care policies underwritten by other insurers. Because of massive Medicare HMO withdrawals, the agency also began selling Medigap plans.

Some 20,000 of those losing coverage through Humana will attend one of its seminars, says Fred Wheeler, Humana's vice president of sales for public programs. Neither Humana nor The MarketPoint Agency was identified by state or federal officials as involved in schemes to dupe seniors.

"If MarketPoint signed up people for a Medigap policy, that was fine," Wheeler says. "And if we didn't get a single person interested, that was fine, too, because the No. 1 reason for having these meetings is to educate consumers about their options."

MarketPoint's reason for being at the seminars are fully disclosed to seniors attending, Wheeler says. "At the end of the session, if they want to learn more about Medigap, MarketPoint will be there. If somebody asks us if there's a commission involved, we tell them yes. It's no different than any other agent."

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