Deceptive discounting. In some cases, consumers are being taken in by people advertising discount health plans as health insurance. Discount plans have existed for years and can be a legitimate way for people to save on healthcare. For a monthly membership fee, people are generally given a card that offers cut-rate prices on prescriptions, vision, dental, and other services, for example, or markdowns on charges from hospitals and doctors who contract with the program. But true discount plans are not health insurance and aren't intended to substitute for health insurance. According to Quiggle, "shady" discount medical plans use terms that imply insurance, such as "health benefits," to dupe people into believing they're buying full-benefit coverage when they're not. A decade ago, there was virtually no regulation of the industry, say industry experts, and even though state regulators have since ramped up their oversight, problems remain.
In January, Massachusetts became one of several states that regulate the sale of discount health plans to better protect consumers. After passing its own healthcare reform law in 2006, which required Bay Staters to have coverage, Massachusetts experienced complaints from residents who were misled to believe they were buying insurance when they were actually being sold a discount plan. Last year, the state's attorney general, Martha Coakley, sued several companies, some for deceptively trumpeting their discount plans as "low-cost quality healthcare for the individual and entire family" and "top-rated insurance" that would satisfy the new coverage mandate, among other claims. California has also had persistent problems with the plans, including companies using deceptive marketing blitzes in communities with high numbers of uninsured people, says Cindy Ehnes, director of the state's Department of Managed Health Care.
Such a campaign caught the eye of Linda Andlovec, 60, of Foresthill, Calif., in early 2009. Days after she and her coworkers were told that their employer, a small company, could no longer afford their health insurance, an enthusiastic woman called to say she'd heard that Andlovec had lost her coverage, and could offer a great, time-sensitive deal on health insurance with monthly premiums of less than $100, and low or no copayments for doctor visits. But Andlovec would have to quickly provide her bank account number, since open enrollment was about to end.
"There was this little voice in my head going, 'Jeez, don't be desperate, Linda, don't do it,' but at the time I felt real desperate," she says. The thought of being uninsured was frightening, especially because years earlier doctors had detected a benign lump in her breast that needed regular monitoring. Hours after signing up, and providing contact information for many of her friends, she tried to cancel but couldn't reach anyone at the number provided. Ten to 15 of her coworkers also took the bait, Andlovec says. Weeks passed before anyone from the group could finally reach a human being at the company. Eventually, the group learned that what they'd purchased wasn't in fact health insurance at all.
"It took months to get my money back," says Andlovec. In February, California regulators ordered the company she'd signed up with, Easy Life Healthcare, to cease doing "unauthorized, deceptive, and unlawful" business in the state, including "misrepresenting their products" by purporting "to provide health insurance during the solicitation process," according to court papers. "Easy Life denies the allegations" set forth in the cease and desist order, says David Boren, the company's counsel.
Protect yourself. The best way to avoid being scammed when presented with an enticing offer is to call your state's insurance department and ask whether the company or agent is licensed to do business in the state and if any action has been taken against them. Local Better Business Bureaus also collect complaint data. In general, warning signs include unsolicited insurance offers made by fax, phone, or E-mail; "act now" and other high-pressure sales pitches ("Nobody should be pressured into making a decision on the spot, and in a legitimate situation, they would not be," says Sandy Praeger, Kansas insurance commissioner); being asked to provide bank account or credit card numbers to get locked in; and monthly premiums that are much lower than usual. Know too that there is no "ObamaCare" plan being marketed or sold by the federal government, Praeger says.
The consequences of falling prey can be grave, says Quiggle, from crushing bills—even bankruptcy—to ditching legitimate coverage for what only appears to be a good deal. Hey and Andlovec, now uninsured, learned the hard way that what sounds too good to be true generally is.
[Don't Get Short-Changed by Short-Term Medical Insurance]