October 5, 2009
Consumers desperate for low cost health insurance can often be talked into signing up for medical discount cards because marketers are unclear, or downright deceptive. In Minnesota, the state has taken legal action in two separate cases.

Minnesota Attorney General Lori Swanson has sued Consumer Health Benefits Association, a Missouri non-profit corporation with its principal place of business in Florida; and Home Health America, LLC of Nevada, which offered long-term and home care benefits to elderly citizens for fees of up to $4,000 without being licensed as an insurance company.

Swanson accused both companies of scamming Minnesota citizens struggling with the high cost of health care into believing they were purchasing health coverage at an affordable price when they were really purchasing non-insurance products that offered limited benefits.

"Many people are struggling with skyrocketing health insurance premiums. Some companies are exploiting the lack of affordable health coverage by aggressively promoting risky, unregulated health coverage products that offer little or no financial protection if you get sick," said Swanson.

Swanson said the companies are among a niche group of marketers that seek out citizens who are looking for affordable coverage in the face of high health insurance premiums. Family health insurance premiums in Minnesota rose 108 percent from 2000-2009, while median earnings rose by only 22.6 percent, according to a September, 2009 report by Families USA.

The lawsuit against Consumer Health Benefits Association alleges that it targeted people looking for affordable health insurance, misleading them into paying an enrollment fee of $129.90 and a monthly fee of between $129.95 to $149.95 by misrepresenting that it offered health insurance or the functional equivalent of health insurance.

The lawsuit alleges that during sales calls to consumers, CHBA misrepresented that its "New Choice Health Plan" was insurance or just like insurance; covers 80 percent of medical expenses; requires only minimum co-pays for doctor and hospital visits; and has a vast network of doctors and hospitals at which CHBA provides coverage. In reality, CHBA is a so-called "health discount plan" which does not provide insurance coverage or otherwise cover claims, but instead purports to offer certain discounts off the "retail price" charged by certain doctors and clinics. Health discount plans like CHBA are not licensed or regulated by the State of Minnesota; unlike an insurance policy, they do not and cannot legally assume the legal obligation for paying claims.

The lawsuit alleges that CHBA obtained marketing leads of citizens shopping for health insurance quotes on the Internet and then aggressively telemarketed those citizens, in some cases pushing for quick sales by claiming that its current premiums were only available for a limited time or that it could only sell coverage to a few more customers in Minnesota.

CHBA immediately charged citizens a combined enrollment fee and monthly fee in excess of $250 after obtaining their bank account information during the initial sales call, the suit alleges. It only sent written materials describing the plan after citizens had signed up. After learning of CHBA's actual limited terms (e.g. when they reviewed the written materials CHBA sent them after they enrolled or when they needed health care and attempted to use the plan), many people soon cancelled.

Swanson says more than 40 percent of CHBA enrollees cancelled in the first month, 64 percent cancelled in the first three months, 82 percent cancelled in the first six months, and 94 percent cancelled in the first year. Approximately 2,250 Minnesota citizens signed up with CHBA since 2003.

The Attorney General's Office said this case is the latest example of companies engaging in "bait and switch" tactics, in which marketers make extensive oral misrepresentations and then attempt to "cover" themselves through after-the-fact written disclosures or tape recordings in which they attempt to disclaim these statements.

For example, the Attorney General's Office said that it is increasingly encountering telemarketers who "coach" citizens to ignore red-flags on recorded verifications. The lawsuit alleges that CHBA "baited" consumers into purchasing the plan by making extensive oral misrepresentations and charging the consumers the processing fee and initial monthly fee at the end of the telemarketing call, before consumers received their membership packet setting forth the terms and conditions of the plan.

The lawsuit against CHBA alleges that the company violated the State's consumer fraud and deceptive trade practices laws. CHBA was sued by the Illinois Attorney General's Office in 2005. In a 2007 settlement with that office, CHBA agreed not to represent that its plan was health insurance or commensurate to health insurance.

The lawsuit against Home Health America, LLC and its owner, Michael Woodward, alleges that the company sold elderly Minnesota citizens long-term and home care coverage for fees of up to $4,000, even though it was not licensed as an insurance company.

The lawsuit alleges that Home Health America sent elderly Minnesotans mailings describing the high cost of home care. The mailings invited the senior citizens to return a post-card for more information on home care benefits.

People who returned the postcard were soon called by defendant Michael Woodward, using the alias "Mike Woods," who requested to meet with the seniors in their homes. When he did so, Woodward told seniors that Home Health America would provide home care and other long?term care services in exchange for a lump sum payment of between $3,000 to $4,000.

In some instances, Woodward reportedly told seniors that the payment covered one year of home care services. In other instances, he told seniors that their lump sum payment was not limited to any term. Within days of making their payments, Minnesota seniors received letters stating that their "program" had been "upgraded" to include medical services such as 24?hour nursing care and assisted living care.

In some cases, Home Health America refused to pay claims, and the Attorney General's Office said it is not aware of any case did where it paid claims in excess of the citizen's initial payment.

ConsumerAffairs.com has received large numbers of complaints about Consumer Health Benefits.

Discount plans are not insurance.

A health discount plan is not an insurance policy and does not provide insurance protection; instead, at best it offers limited discounts from the retail price charged by certain doctors and clinics. A health discount plan does not pay your doctor, clinic or hospital for your bills and cannot legally insure you for health care expenses. Under Minnesota law, only a licensed insurance company and agent can sell you an insurance policy. If the company is not licensed, it cannot legally provide insurance coverage for your claims.

Read the plan before you buy it.

Some companies pull a "bait and switch" on the consumer. They make all kinds of promises about the supposed benefits of the plan on the phone and then send you written materials describing the actual terms only after you allow your account to be charged for an enrollment fee or monthly fee. These companies may then refuse to make refunds after you discover you were misled. Do not do business with any company that won't send you the written materials to review before you buy.

Walk away if they say "time is running out."

Beware of plans that push for quick sales. For example, the salesperson may tell you that the current monthly fee is only good for a limited period of time or that the company is only allowed to sell to a few more customers in the state. Walk away from companies that try to pressure you to buy without doing your homework by telling you that you'll lose the "deal" if you don't accept it on the spot.

Beware of empty promises.

Sellers of health discount or other non-insurance plans mislead some citizens by using words that sound like an insurance policy; for example, they may call the monthly payment a "premium" or may talk about deductibles or co-pays. Some citizens purchased a health discount plan because they were told it was an "insurance plan" or "just like" an insurance policy or that it had a broad network of doctors. Remember that it is against the law for a health discount plan or non-licensed company to insure or take responsibility for paying your health claims-the best they can do is offer limited discounts at certain doctors. In some cases, the "plan" or "policy" being sold may not even exist.