Buyer Beware

Government Bureaucrats aren’t the only ones preparing for a key component of President Obama’s signature health care law that goes into effect this fall.

Health care exchanges, the marketplaces where people can buy soon-to-be-required insurance, launch Oct. 1, and experts warn that their debut could create a prime moneymaking opportunity for illegal scammers and others looking to capitalize on consumer confusion. “There are people licking their chops and saying, ‘A sucker is born every minute,'” says Elizabeth Abbott of the consumer group Health Access California.

There are two main types of potential snares for consumers: outright cons and insurance-like plans that give the impression of offering more coverage than they actually provide. Regulatory agencies are already on high alert for fraud. Both the Federal Trade Commission and the Better Business Bureau have posted warnings about Obamacare-related identity theft. And in Pennsylvania, one enterprising insurance broker set up a website with the official state seal and the title Pennsylvania Health Exchange. The site was removed after a warning from the state insurance department.

Some quasi-insurance products expected to proliferate come October are “discount medical plans,” which promise lower health care costs in exchange for a recurring fee. Many of these plans lure customers with language that implies comprehensive coverage, but the reality is far more limited.

“The problem is, people pay the money, buy a plan, and when they get sick, they find out they don’t have the financial security they thought they had,” says Minnesota attorney general Lori Swanson, who has sued several discount medical plans for deceptive marketing practices. Consumer watchdogs are also wary of plans that reimburse consumers with set amounts for doctor visits or hospital stays, regardless of their actual cost.

Obamacare bans some forms of skimpy coverage, but with enforcement left to the states–some of which are less than enthusiastic about the law–don’t count on those misleading plans disappearing overnight. “Will the states crack down on them?” asks Timothy Jost, a law professor at Washington and Lee University and an expert on insurance regulation. “Well, a number of states aren’t enforcing the Affordable Care Act at all.”