With medical costs skyrocketing and more people without insurance or uninsurable, the lure of discount plans that offer cut-rate fees to all comers has much appeal. But some unscrupulous marketers are doing everything they can to imply that the discount plans are an alternative to comprehensive medical coverage.
"These medical discount benefit plans sound appealing because they masquerade as health insurance," said David Vladeck, director of the FTC's Bureau of Consumer Protection. "But they are not insurance. They don't offer the benefits of health insurance, and victims don't know they've been ripped off until they've tried to use the service and paid their bill."
With so many unemployed, uninsured and uninsurable, scammers are stalking their prey. The FTC, state attorney generals, and insurance commissioners are cracking down on bogus medical discount plans. Earlier this month these groups announced a law enforcement sweep targeting fraudulently marketed medical discount plans. The FTC and law enforcers in 24 states have filed a total of 54 lawsuits and regulatory actions to stop the deceptive practices.
In one case, at the request of the FTC, a U.S. district court has ordered a temporary halt to the deceptive actions of Consumer Health Benefits Association, which targeted people who sought information on the Internet about major medical health insurance plans.
CHBA telemarketers allegedly pitched consumers with a long list of false claims, including, that they worked closely with major medical insurers; that the discount plan was widely accepted by doctors, pharmacies, and other health care facilities; that the plan would save consumers up to 85 percent on medical expenses, among others.
Consumers paid between $29 and $280 in enrollment fees before they received written information about the plan. When they tried to use the plan with physicians CHBA claimed were "participating providers," the providers said they did not accept the plan. One consumer who tried to use the plan to buy prescription medicine discovered the "discounted" price was higher than the price she had paid without the medical discount plan.
The FTC also charged that CHBA misrepresented its refund policies and that typically, consumers received refunds only after they threatened to complain to consumer protection agencies. The FTC is seeking a permanent halt to the alleged illegal activities and has asked the court to order the defendants to give up their ill-gotten gains.
CHBA could not be reached for comment.
What Is a Medical Discount Plan?
What exactly is a medical discount plan? Discount health care programs began operating about 20 years ago, primarily to offer access at lower rates to ancillary health care services not typically covered by insurance plans, such as dental, pharmacy, vision, chiropractic and hearing. These benefits comprise about 95 percent of discount memberships.
Legitimate discount health care companies always have made clear that the access they provide to these services is not insurance, according to the Consumer Health Alliance (CHA), whose companies provide discount health services to more than 45 million Americans. The organization issued a statement supporting the FTC's enforcement efforts against fraudulent marketing of discount health care programs.
"CHA supports the FTC's efforts to eliminate fraudulent and misleading marketing of discount health care programs. Discount health care programs provide millions of members with access to substantial savings on health care products and services. It's important that consumers have continued access to legitimate discount programs which make health care more affordable, while also being protected against fraudulent outfits that misrepresent these programs," according to the group's statement.
The challenge is how to tell a legitimate health discount plan from a scam. "If you have significant out of pocket expenses for healthcare, a legitimate discount plan could help save you money," says Evan Falchuk, president of Best Doctors, a medical resource to help people get the right diagnosis and right treatment.
Let there be no confusion. "You pay a fee for a list of health care providers that are willing to offer discounts to members of the plan. They do not pay actual health care costs," warns Mackey McNeill, a CPA and member of the American Institute of Certified Public Accountants National CPA Financial Literacy Commission.
Some medical discount plans claim to provide big discounts from hundreds of providers for a wide range of services, from doctor visits and dental exams to hospital stays and prescription drugs. But many plans fail to make good on those claims. While some medical discount plans provide legitimate discounts that benefit their members, many take consumers' money and offer very little in return.
Shop Around, Call Health Care Providers
Know what you're getting. Is it medical insurance or a medical discount plan? If you're not sure, check with your state insurance commissioner to see if the company offering the plan is registered to sell insurance in your state. If not, and you want to buy health insurance, consider shopping elsewhere. A health insurance plan generally covers a broad array of services, and pays you or your health care provider for your medical bills.
If you buy a medical discount plan, you generally are paying for a list of providers and sellers who may be willing to offer "discounts" on some of their services, products or procedures. That list isn't exactly cheap. "If you look at the websites of some of the still-operating discount plans, you see that they are charging as much as $2,000 a year for their plans. It's an almost absurd amount of money for what they are offering -- an insurance company pays a very tiny fraction of this amount for access to the same thing," says Falchuk.
Consider whether the discounts actually apply to the doctors and hospitals where you get care. "Be careful with claims of having thousands of providers. It may be true, but which providers are in the network? If you live in Massachusetts and there are only 100 doctors in the network there, and thousands in California, it's not much help for you," adds Falchuk.
If you decide to pursue a medical discount plan, the FTC offers advice for sorting the legit from the bogus. Look for a telephone number or website of the company you're considering doing business with so you can get more information. Before you pony up any cash, ask the company for a list of participating providers. Call them and ask about the services and discounts they're offering. If the plan doesn't provide that list promptly, forget about it.
Read the fine print, paying particular attention to the refund policy. If a plan doesn't readily provide information and answers before you buy, it isn't likely to be responsive once they have your money.
You Can Negotiate Costs Without a Plan
Do the math. Try to calculate what your total payment for a discount plan will be for a given period of time. You could be responsible for paying a substantial amount up front, in addition to monthly fees and other costs. The costs of the program may total more than the savings you anticipate.
"Consumers need to know that most providers will offer the same discounts with or without a discount plan," says Keith Mendonsa, consumer specialist at eHealthInsurance.com. "So if you are comfortable negotiating your cost, you don't need a discount plan. Some discount plans are fraudulently marketed by saving they provide insurance coverage. Be aware if they also say, there is no medical underwriting. Make no mistake, these discount plans do not offer what a real health insurance plan will offer," he adds.
Listen to your gut. Says Falchuk, "If your gut tells you that you need to wonder about what you're hearing, it's a bad sign. If it seems too good to be true, it probably is."