FTC works to crack down on health care 'discount' plans

Reuters: "The Federal Trade Commission said on Wednesday it is working with 24 states to crack down on sellers of medical discount plans that market them as health insurance that covers doctors, hospitals and other services." The prevalence of such plans has increased since March, when Congress passed its health overhaul. "The FTC along with several state attorneys general have filed lawsuits against companies that they say mislead consumers by selling medical discount plans that offer some savings but marketing them as insurance accepted by doctors, hospitals and others" (Heavey, 8/11).

Bloomberg/(Minneapolis-St. Paul) Star Tribune: "Minnesota Attorney General Lori Swanson, who filed three cases against companies alleged to have sold fraudulent health benefit plans, said economic conditions also created the potential for scams. In her state, the number of uninsured people increased to 9 percent last year from 7 percent in 2007, she said at the news conference. … The FTC filed three lawsuits against closely held companies it alleges to have sold fraudulent discount plans." State officials estimate the number of people who may have purchased one of these plans "to be in the tens of thousands" (Wayne, 8/11).

CBS 5 in San Francisco: "Geneieve Lim also bought a similar medical discount policy from a company called ALR, the Association for Lifestyle Reform. Lim paid $199 a month for what she thought was full health care coverage. But when she had a medical emergency, she ended up being billed for $6,000 while ALR only paid $216. … ALR insisted to CBS 5 that it would never mislead anyone into thinking they have health insurance despite commercials on the internet where sales people refer to ALR's plan as 'health insurance you can really afford'" (Yee, 8/11).

NBC News/KTUU in Alaska: "The FTC says the insurance scams are all part of a growing trend in this tough economy, where consumers looking for a quick fix on everything from health care to debt relief can quickly become a target." The agency suggests consumers curious about purchasing one of these plans "look for a telephone number or website of the company" they are interested in. "Before you pay any money, ask the company for a list of providers who participate in its plan. Then call the providers and ask about the services and discounts they're offering. If the plan doesn't provide a list of providers promptly, consider taking your business elsewhere" (Franzen, 8/11).

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This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.