How to Protect Yourself from Insurance Scams

by CBS News correspondent Wyatt Andrews and producer Kate Rydell

In our story tonight on fake health insurance, we document how thousands of Americans have been scammed by con artists promising low-cost major medical insurance but delivering either medical discount cards -- which don't always work as promised and which are not insurance -- or a membership in some association which is supposedly buying real insurance for its members, but often isn't.

Here's what consumers should know about shopping for individual health care today:

First, understand that the scammers are looking for middle-aged Americans who've lost their jobs - and their group health insurance - in the recession and who are desperately looking for a low-cost way to protect themselves. The scammers delight in this desperation. You will find that if you leave your phone number on a website that seems to be offering affordable health care, you will be besieged with multiple, high pressure offers within minutes. Not all of these calls will be bogus, but many will be.

How can you tell whom to trust, especially when some discount cards and some low cost association based insurance plans are legal and legitimate?

CBS News has checked with numerous state Insurance Commissioners, state attorneys general, and leading consumer advocates - and their advice to consumers is this:

• Hang Up on High Pressure: Do not buy any kind of insurance product or discount card from a sales person who says the deal has to be done "right now," or says the offer is only good for "a limited time." This is the reddest of red flags. Legitimate, licensed insurers are generally not allowed to pressure a sale. If you feel any high pressure tactic, hang up.

• Check the License: Anyone selling insurance or an association backed by insurance must be licensed to so do in your state. So take notes on the following questions:

What is this card exactly?
What networks take this card?
What's the name of the association?
What insurance company is covering the association?

Armed with that information, you should then call your state office of insurance, which can tell you fairly quickly if your would-be association or insurance company has a license to sell to you.

For more information:

• Tips on how to protect against fraud from the National Association of Insurance Commissioners
• The consumer group Families USA has fraud alert tips and a good list of states pursing action against phony providers.
• Information from the state enforcement from the FTC.