FTC whacks scam­mers

Fake dis­count plans tar­geted by feds and states

Modern Healthcare - - The Week In Healthcare - Re­becca Ve­sely

The con­tin­ued eco­nomic down­turn, high unin­sured rate and con­fu­sion over re­quire­ments in the new fed­eral health re­form law are fu­el­ing health in­surance scams that can leave con­sumers deep in debt, ac­cord­ing to fed­eral and state law en­force­ment of­fi­cials.

In re­sponse, the Fed­eral Trade Com­mis­sion, work­ing with of­fi­cials in 24 states, last week an­nounced a crack­down on fake med­i­cal dis­count plans, which prom­ise cut-rate med­i­cal ser­vices but fail to de­liver. A to­tal of 54 law­suits and reg­u­la­tory ac­tions have been filed.

In Cal­i­for­nia, the FTC has filed a law­suit against Health Care One, Phoenix, and af­fil­i­ates, and a fed­eral judge ap­pointed a re­ceiver on Aug. 8 to as­sume com­pany op­er­a­tions. The ac­tion fol­lows a Fe­bru­ary cease-and­de­sist or­der from the Cal­i­for­nia Man­aged Health Care Depart­ment, which reg­u­lates HMOs in the state.

Health Care One al­legedly im­plied in pro­mo­tional ma­te­ri­als that it was af­fil­i­ated with the fed­eral govern­ment and claimed that en­rollees would save on health­care costs from a net­work of 900,000 providers. Mem­bers paid monthly fees and then had trou­ble disen­rolling, a priv­i­lege for which they ul­ti­mately were charged a “pro­cess­ing fee” of $95, ac­cord­ing to the FTC and the cease-and-de­sist or­der.

In sim­i­lar cases across the coun­try, com­pa­nies al­legedly en­gaged in de­cep­tive mar­ket­ing prac­tices, dis­guis­ing the schemes as health in­surance and pitch­ing con­sumers on empty prom­ises via tele­mar­keters. The Con­sumer Health Ben­e­fits As­so­ci­a­tion in New York al­legedly told con­sumers it worked closely with ma­jor in­sur­ers and would save them up to 85% on med­i­cal ex­penses, ac­cord­ing to the FTC. Last month, the Min­nesota at­tor­ney gen­eral won a con­sent judg­ment bar­ring the com­pany from do­ing busi­ness in that state and or­der­ing $500,000 in fines.

“Vic­tims don’t know they’ve been ripped off un­til af­ter they’ve tried to use the ser­vice and pay their bill,” said David Vladeck, di­rec­tor of the FTC’s Bureau of Con­sumer Pro­tec­tion, in a writ­ten state­ment.

In a third case, a U.S. District Court in Ten­nessee last week froze the as­sets of United States Ben­e­fits and put the com­pany in tem­po­rary re­ceiver­ship. The FTC and the state at­tor­ney gen­eral said the pri­vate firm sold mem­ber­ships to a “ben­e­fits as­so­ci­a­tion” with lit­tle or no value, when con­sumers were led to be­lieve they were buy­ing health in­surance.

More than 1,000 con­sumers in Cal­i­for­nia alone have com­plained to the Man­aged Health Care Depart­ment about these scams since 2004. Most said that they thought they were pur­chas­ing health in­surance but in­stead in­curred high med­i­cal bills as claims went un­paid. In re­sponse, the state has or­dered 18 un­li­censed dis­count health plans to cease op­er­a­tions or be­come li­censed. To date, only one med­i­cal and two den­tal dis­count health plans have be­come li­censed.

“Con­sumers must have as­sur­ances that the dis­counts of­fered by these plans are real, and that the cards will be ac­cepted within the med­i­cal com­mu­nity,” said Cindy Ehnes, di­rec­tor of Cal­i­for­nia’s man­aged-care depart­ment.

Providers have been call­ing on law en­force­ment of­fi­cials for years to deal with the prob­lem as they watch pa­tients fall prey to scams. Ear­lier this year, the Cal­i­for­nia Med­i­cal As­so­ci­a­tion urged the state man­aged-care depart­ment to scrap reg­u­la­tions for dis­count med­i­cal plans and pro­hibit them from op­er­at­ing in the state al­to­gether.

“Dis­count health plans are a night­mare for pa­tients and doc­tors,” said An­drew La­Mar, spokesman for the Cal­i­for­nia Med­i­cal As­so­ci­a­tion. “Doc­tors get caught in the mid­dle, when pa­tients dis­cover their so-called dis­count plan pro­vides no ben­e­fit or cov­er­age and no dis­count. But it’s not the fault of the doc­tor or the pa­tient. It’s the prod­uct of scam artists who don’t want to play by the rules for health in­surance.”

Ehnes: Con­sumers need as­sur­ances that dis­count plans are real.

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