Massachusetts Cracks Down On Medical Discount Plans

Consumers often believe they are buying health insurance

September 16, 2009

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A medical discount card is not a health benefit plan. Many a consumer has learned that lesson the hard - and costly - way. All too often, the marketers of these discount plans have done their best to blur the difference.

In Massachusetts, Attorney General Martha Caokley has filed proposed new consumer protection regulations designed to protect residents of the Bay State from unscrupulous marketing of plans that claim to offer discounts on medical products or services. The proposed regulations are part of the Attorney General's general crackdown on deceptive marketing of medical discount plans.

In addition to the regulations, Coakley has also published a consumer education advisory and pursued law enforcement actions to protect consumers from medical discount plan scams.

"As a result of health care reform in Massachusetts, all residents are required to have health insurance and are presented with a wide range of coverage options. It is critical that companies who offer any kind of medical coverage plans or medical discount card clearly disclose what their plans do and do not offer, and whether they fulfill the individual mandate." Coakley said. "We have received numerous complaints from consumers who have fallen victim to these deceptive discount plan scams. The new regulations that we are proposing will complement ongoing efforts to protect consumers from these deceptive practices."

Medical discount plans claim to offer consumers discounts for specific health care products or services from certain providers in exchange for some form of fee. Under a medical discount plan, the plan member receives a discount, but is obligated to make all payments for services provided. Medical discount plans are not insurance products and are not regulated by the Division of Insurance. These plans also do not meet the minimum coverage standards as required under health care reform.

The proposed regulations filed with the Secretary of State's Office would require organizations marketing medical discount plans for sale in Massachusetts to fully disclose how the plan works and whether the plan is limited to certain services or products from certain providers. The disclosures must make clear that the discount plan is not insurance and that the consumer will be required to pay for any services or products. In addition, the regulations will require medical discount plans to maintain lists available to consumers of any providers who have agreed to offer the plan's members discounts.

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