Don't buy fake health insurance

NEW YORK (CNNMoney.com) -- Massive unemployment and a changing health care system is creating a breeding ground for con artists. One of the fastest growing scams is fake health care coverage.

You may see ads stapled to neighborhood telephone polls, flyers left on your car or maybe you'll get a phone call from someone who's selling health insurance at extremely low rates, as low as $29.99 a month in some cases, says Jim Quiggle of the Coalition Against Insurance Fraud. The sad truth is that often these bogus policies pay little or nothing on claims, leaving consumers with exorbitant medical bills.

These bogus policies may sound legitimate. They may masquerade as unions or trade associations. American Trade Association, for example, sounds like a legit association, but this notorious scam operation was shut down recently by Tennessee's Insurance Department, says Quiggle. These operations may have legitimate looking websites with logos that were ripped off from legitimate businesses.

Here's how you can protect yourself from this scam.

First, beware of pushy marketers who won't let you see the policy and try to get you to buy on the spot. A legitimate company will give you time to look over the policy. Also, be suspicious if you are told that you can get guaranteed acceptance, regardless of pre-existing conditions.

If you have any doubts about the legitimacy of an insurance company, call your state's insurance department. Ask if that operator is licensed to do business in your state.

"Fake health plans won't be licensed. If they were, regulators would be breathing down their necks. And the last thing they want is regulators to know what they're up to," says Quiggle.

If you're going to buy health insurance, make sure you speak with family and friends to get recommendations, says Barry Johnson of Healthcare Insight, a fraud-prevention company.

If you get scammed, it's not only a high medical debt you have to worry about. Besides the obvious hit to your credit score if you can't pay those bills, you could be opening yourself up to ID theft if you give out sensitive information like your Social Security number or your credit card number.

"This could reach into your financial existence," says Quiggle.

Older people on Medicare are particularly susceptible to scams, says Johnson. Mobile medical clinics may visit communities and offer "free" services, like tests or medical supplies like orthotics after you've provided your Medicare number. These con artists then use your number to make bogus Medicare claims against your policy. Make sure you protect your policy number as you would any other piece of identification.

Talkback: Have you received offers of low-cost health insurance?