State’s taking Strong Actions against Fraudulent Discount Health Cards

  • Date: April 06, 2010
  • Source: Admin
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Fraudulent discount health cards take advantage of vulnerable consumers and should face some of the toughest restrictions in the nation, a top state regulator said Monday.

The cards are advertised as providing discounts on health care bills. But too often, when consumers seek to use them, they find their doctors or pharmacies have never heard of the card, said Cindy Ehnes, director of the California Department of Managed Health Care.

At a news conference Monday in Oakland, Ehnes announced plans to license such companies and to impose other regulations to ensure they deliver on their promises.

An organization representing health card companies said the proposal went too far, but the California Medical Association said the state should simply ban the cards.

The state health care agency has received more than 1,000 consumer complaints about such cards since 2003.

"Consumers must have assurance that the discounts are real, and that the cards will be accepted within the medical community," Ehnes said.

The Department of Managed Health Care has licensed five discount health cards after receiving assurances that the firms have contracts with a network of doctors, dentists and other health care providers who have agreed to discount their bills.

But Ehnes estimated that as many as 150 unlicensed firms operate in the state. Many falsely lead people to believe they are purchasing health insurance, Ehnes said. She added that this is particularly bad at a time when many people are losing coverage.

David Manes, a resident of Foresthill in Placer County, lost his health insurance in early 2009 when his company said it could no longer afford to provide it.

Because he has chronic kidney disease, he knew he would have trouble finding another health insurance provider. So a $99-per-month discount health card appealed to him. The sales representative told him he could obtain large discounts on his health care bills.

"Being in the desperate situation that I am in," she said. "I bought into this package."

So did one of his co-workers, Linda Andlovec, who was told that thousands of doctors were participating. But she learned that neither her doctor nor nearby drugstores had heard of the card.

Both Manes and Andlovec canceled but had to forgo their $99 application fees.

The Consumer Health Alliance, which represents discount health care firms, argued that most offer legitimate benefits.

"How many millions in savings have we provided consumers over the years?" asked lobbyist Andrew Govenar of Governmental Advocates.

The Consumer Health Alliance said in a written statement that it supports reasonable regulations such as those that have been adopted by 30 states. But it argued that the California proposal goes too far and contains "onerous provisions," including limitations on the types of products that can be sold and excessive filing fees, and that it would hamper legitimate businesses that assist consumers who lack health insurance or have gaps in their coverage.

But an organization representing the state's doctors argued that the regulations do not go far enough. California should outlaw such cards, said the California Medical Association.

"These plans are dangerous deceptions for patients, who think they are getting some benefit or coverage, but in fact are getting absolutely nothing," said CMA President Brennan Cassidy.

The CMA also questioned whether the Department of Managed Health Care has the authority to impose such regulations without legislative approval.

Ehnes said she finds it particularly offensive that some firms target unsophisticated consumers who speak limited English. All it takes for some companies to do business, she said, is a call center and a fax machine.

She told of one Los Angeles doctor who reported that his Spanish-speaking patients would present the card, believing they had health insurance, yet he had no relationship with the firm.

Some companies use terms such as "co-pays" to mislead people into thinking they are buying health insurance, Ehnes said.

She played a television ad run by one company that talked about federal health care reform and ended with a photo of the White House, implying that the federal government was involved.

The proposed regulations won praise from a representative of Health Access California, a consumer group.

"We are very concerned about this business activity in the state of California because of what is clearly an attempt to take advantage of less-sophisticated consumers," said Health Access project director Elizabeth Abbott. "In most cases, this is not a reasonable alternative for people."

Since September 2004, the Department of Managed Health Care has ordered 18 fraudulent discount health card companies to cease operations or to obtain licenses licensed.

Last week, Ehnes took action against several unlicensed firms operating under the name of HealthcareOne, ordering it to stop operating in California because it allegedly used deceptive marketing tactics.

Ehnes said that after a time for public comment, she hopes to have the new regulations in place later this year.


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