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 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.