Watch with whom you associate for health insurance
By Lucy Lazarony • Bankrate.com

For someone shocked by health insurance costs, a health plan through an association can seem like the perfect solution.

Sign on for insurance through a professional, trade or alumni association and you could land a good, affordable health plan, regardless of your age or medical condition.

Or you could be victimized by a scam.

Just ask Sandra Smith, 55, of Modesto, Calif. She signed up for insurance after joining the National Writers Union three years ago.

She took little notice when the National Writers Union switched to Employers Mutual LLC for its health insurance. All that changed in summer 2001, when she submitted claims for some routine annual exams.

"The next thing I know, bills aren't being paid," Smith says. "It ran up to a couple thousand dollars."

Left holding the bag
All told, Smith was out about $4,000 -- $2,000 in medical bills and $2,000 for a worthless premium. And she considers herself one of the lucky ones.

She knows of a writer who nearly lost vision in one eye because she couldn't get a simple cataract operation approved.

It turns out Employers Mutual LLC had been selling bogus health care plans all over the country and sticking more than 30,000 victims with $27 million in unpaid medical claims.

"They take gross advantage of the people who can least afford it," Smith says. "It's criminal and it's obscene."

And it's highly profitable for scam artists. In a 10-month stretch in 2001, Employers Mutual LLC raked in $15 million in premiums from unsuspecting consumers.

"In law enforcement circles, these are called cash cows," says Mila Kofman, an assistant professor at the Health Policy Institute at Georgetown University.

Since 2001, four of the largest association health plan scams have left almost 100,000 people with about $85 million in unpaid medical bills. A wave of similar, smaller scams has hit states such as Florida and Texas.

Sometimes, legitimate associations are duped by phony health plans. And sometimes the professional associations themselves are bogus, set up by the scamsters. That way they can collect membership fees and sell worthless health care premiums to unsuspecting members.

Research the organization
To avoid falling victim to one of these scams, you'll need to be a very careful insurance shopper. And that means researching the association as well as the health plan.

Start by taking a close look at the association -- preferably before you join. Does the association do more than sell insurance to its members? Or is it simply a front for an insurance company?

"Find out how long they've been there and what they do," says Bruce Abbe, vice president of Communicating for Agriculture, a 32-year-old association representing more than 80,000 farmers.

"Make sure it's a legitimate organization that's been around for awhile and goes to bat for its members, bargains for them."

Once you're sure you've joined a legitimate association, you'll want to scrutinize the health plan that it's offering to its members.

First of all, check to see whether the insurer offering the coverage is licensed to do business in your state.