Other misleading products, such as fixed indemnity plans and discount cards, are aimed at people who don’t have employer group insurance, not even a mini-med, and may be having a hard time buying on their own because they can’t afford it or have a pre-existing condition.
If you’ve ever received a fax or robo-call or seen a late-night TV ad offering affordable health insurance, it was most likely for one of those products. And they’re all over the Internet.
“People go to Google and type in ‘affordable health insurance,’ ” says Robert Lisson, deputy commissioner of consumer services at the North Carolina Department of Insurance. “Chances are they’re going to get a bunch of hits on websites that exist solely to generate leads for marketers who call them back in 10 minutes. The sales pitch is that this stuff is great, as good as what you had.”
That’s exactly what happened to Ted Tenenbaum, 59, of Honolulu, who went on Social Security disability in late 2011 because of a serious chronic pain condition.He was able to continue his regular group health insurance, a $440-a-month Hawaii Blue Cross-Blue Shield PPO, through COBRA but expected to have to give it up when he and his wife moved to Florida in early 2012 to be near his brother.
“So I just went online, and at one point or another an application came up to fill in, and I gave my phone and e-mail address,” Tenenbaum says, “and very shortly after that I got a phone call from this one young lady, who left me a message, very excited, saying she had a plan for me and she had worked with people in my situation before.”
The key feature of these products is that they are not health insurance as most people think of it. What are they instead? Usually one or both of the following:
Fixed benefit indemnity plans. These plans will reimburse you a set sum, generally low, for medical services, after which you’re on your own, most likely with a load of medical debt if you experience a major health problem. The $450-a-month plan Tenenbaum was sold was a typical one: it pays $100 apiece for up to five doctor visits a year, $50 a year for screening tests, and $1,000 a day for up to 30 days in the hospital. A typical hospital stay runs about $1,850 a day, and these plans cover little if any of the associated costs, such as tests, medications, and surgery. Unlike mini-meds, which though stingy function like real insurance policies and charge very low premiums, indemnity plans can cost as much as major medical insurance.
Medical discount cards. They promise you, as the name implies, discounts on medical services and other products in exchange for a monthly fee.
While neither of those products is illegal, neither are they major medical health insurance. In fact, fixed benefit indemnity plans are not subject to the provisions of the new health reform law, and come 2014, when everyone must have some kind of health plan or pay a tax penalty, they won’t qualify as coverage.
The problem, say regulators and consumer advocates, is that all too often they’re sold to unsuspecting consumers as if they were health insurance—these days, sometimes with the implication that the plans are part of health care reform.“It’s amazing how quickly these companies appear and disappear,” says Stephen Finan, senior director of policy for the American Cancer Society Cancer Action Network. “They’re small operations that are one step ahead of the sheriff.”
Sometimes, however, the sheriff catches up. Here are examples drawn from recent regulatory actions:
- In California, regulators shut down HealthcareOne, a telemarketed Arizona-based discount card program that advertised itself as “A Real Healthcare Plan Starting For As Little As About 25 Cents a Day” and “a comprehensive Healthcare Program that makes healthcare affordable for everyone.” When consumers tried to use the program, which sold for as much as $90 a month, they couldn’t find providers willing to offer the promised discounts. The receiver appointed to manage HealthcareOne’s affairs estimated that the company was bringing in $500,000 to $600,000 a month.
- The National Better Living Association, a Georgia company peddling a fixed indemnity policy, misleadingly told a Montana consumer with a heart condition “that his preexisting condition was covered and, had to be, because [of] new federal health reform legislation,” according to an investigation by the Montana Department of Insurance. A pregnant customer was told “that NBLA would reduce her hospital bills by 70 percent through negotiations with the hospital.” The discounts never materialized and she was left with more than $20,000 in bills. Regulators are seeking fines and restitution from the company.
- In September 2010, Missouri regulators issued more than $1 million in fines against 13 companies and individuals that sold discount plans misrepresented as comprehensive health insurance. Regulators said many were promoted through faxes advertising “AFFORDABLE HEALTHCARE PLANS!” and consumers were told, “This is not a discount plan!” One woman bought a plan to get the advertised free flu shot. A year and a half later, all she had to show for her $1,717 in payments was one denied claim … for the flu shot.
Adding to the confusion, many plans combine indemnity and discount features “in such a way as to parrot the coverage of conventional health insurance,” says a 2010 report by Colin Gordon, senior research consultant to the Iowa Policy Project.
“One strategy is to have the same plan with eight different websites and eight different names but the same pitches,” Gordon says. They are “sold and resold, branded and rebranded, down a pyramid of third-party vendors and marketers.”
Ted Tenenbaum, for instance, bought his plan through a website for an entity called USHealth Group, but his membership card displays 12 other brand names, including the real name of the company, Freedom Life Insurance Corp. of Texas, that provides the fixed indemnity plan.
“Don’t buy fixed benefit plans,” says Karen Pollitz, a senior fellow at the Kaiser Family Foundation and an expert on individual insurance. “You’ll still be uninsured but out a bunch of money.”