A health discount card is not health insurance, a distinction sometimes lost on consumers, especially if the marketer intentionally misleads them. The State of Arkansas accuses one company of doing exactly that.

Arkansas Attorney General Dustin McDaniel sued Consumer Health Benefits Association, alleging that the company tells potential clients it offers health insurance, but instead only offers a health discount card with limited benefits.

The Florida-based actively markets its health discount card as a health insurance plan through telemarketing sales calls placed to Arkansas consumers, according to McDaniel. The attorney general's lawsuit alleges that CHBA falsely implies that the card they offer is health insurance.

Additionally, the suit charges CHBA overstates the benefits available to Arkansas consumers and also states that many medical providers accept the card as a discount for services. Actually, many providers do not have agreements with CHBA to honor the card.

In addition, McDaniel says the company failed to register to do business before operating in the State, which is required by Arkansas law.

Cards marketed nationwide

CHBA markets its card nationwide and McDaniel says it has enrolled approximately 1,800 Arkansas consumers since 2003. The company typically charged customers a non-refundable enrollment fee of $119 and a monthly fee of between $119.95 and $149.95 to participate in the discount card program.

After receiving the company's card in the mail and attempting to use it, many Arkansas customers cancelled the card within one month of enrollment and approximately 79 percent cancelled within six months of enrollment.

"This discount card does not provide Arkansans with the protections they were promised," McDaniel said. "This company is blatantly taking advantage of consumers who are seeking affordable health insurance."

ConsumerAffairs.com has received many complaints about CHBA over the years, many similar to the ones McDaniel says he has received in Arkansas.

"I was told this was insurance, Sandra, of Winchester, Va., told ConsumerAffairs.com. "My doctors told me they had never heard of it. They called and found out it was a very complex discount plan. I contacted Virginia State Corporation Commission and was informed they are not licensed to do business in Virginia."

McDaniel seeks an injunction to stop the deceptive solicitations in Arkansas, as well as restitution for Arkansas consumers who purchased the discount card. The Attorney General also seeks civil penalties against CHBA under the Deceptive Trade Practices Act and the Health Related Cash Discount Card Act.