According to the General Accountability Office (GAO) [a congressional investigative watchdog], there are up to 150 different fraudulent insurance plans and discount cards disguised as medical insurance. As a result, hundreds of thousands of people (and this is just a cautious estimate) have been deceived, and the material damage from phony insurance has reached into the hundreds of millions of dollars.
Our paper occasionally receives e-mails from obscure companies that have tempting offers to sign up for their medical plans. I receive similar missives at my personal e-mail address, as well as messages from insurance agents on my home answering machine practically every day.
Although I have health insurance, I might possibly consider switching to a cheaper plan (offering the same benefits), if I did not have doubts that these promises from computers and telephones are not run-of-the-mill hoaxes. And today there are more than enough grounds for such suspicions.
The surge in the cost of medical services in recent years coupled with the consumer's desire to find favorably priced insurance has given "enterprising" people the idea of profiting from the difficulties experienced by millions of Americans. This is how phony insurance companies and firms, offering so-called discount cards − doctors’ services and the purchase of medicine at discounted prices − under the guise of complete medical policies came into existence. To be fair, many discount card businesses are respectable and have nothing in common with those that tarnish their good name. However, this is not about those companies.
A client (or business) loses money in fraudulent insurance and discount cards cases. However, for the sick, there is something more terrible than monetary losses. Having signed up for phony insurance or discount plans, they subsequently have great difficulty in purchasing a policy from a legitimate insurance company. They end up having to wait quite some time until a company agrees to do business with a person whose health condition requires constant monitoring by doctors.
It is very difficult for the novice consumer to make sense of the myriad of so-called insurance plans on the market and identify companies that do not have any kind of license. For example, the General Accountability Office tells us that five to 14 fictitious insurance companies operate in the small state of Hawaii, while more than three dozens operate in Texas. Experts from the National Association of Insurance Commission (NAIC) indicate that medical swindlers usually woo low-income people and the elderly, as well as small businesses. The deception is not at all elaborate.
Fraudulent insurance companies place advertisements in the mass media of a specific city inviting licensed insurance agents to partner with them. The latter do not even suspect that the service they are being offered to sell is – pardon the unprintable word – crap. Particularly suspicious insurance agents are told that the medical plan has been approved not by the state, but by federal government authorities. So get to work, sirs, and don't doubt our honesty. The low cost of the policy offered by a company could be a red flag to experienced insurance agents. However, few are surprised; they think, “Well, it's none of my business, we live in a free country, tens of thousands of businesses open every day.” What happens to those who sign up for a false plan does not really worry the insurance agents. They leave the worrying to their individual or small business clients. Suddenly it turns out that monetary compensation for medical services was never made to the client and people end up having to pay out of their own pocket; moreover, the amounts owed can be dizzying, since it is not unusual for a client to be examined by dozens of doctors and have had dozens of tests.
It's the same story with discount card fraud passed off to trusting people under the guise of medical insurance.
An article entitled "They think they are insured. They're not" in Business Week, tells the story of 42-year-old Minneapolis, Minn. resident Michelle O'Kelly, who suffers from diabetes since childhood.
According to O'Kelly, she has always feared losing her insurance, since even temporary lapse in her coverage carried the threat of losing coverage for an extended period of time; insurance companies do not rush to offer services to people as sick as she is.
Having lost her job and her insurance plan with it, Michelle did not delay in searching for a new policy that would be affordable for her. Surfing the Internet, she found the International Association of Benefits (IAB), which offered an ample package of insured benefits for only $169 a month. The first bell went off when O'Kelly had to pay $75 for a box of insulin (the discount was only 50 cents!), but she did not try to figure out what had happened because she soon found a new job with benefits. However, the situation with the medicine was only the beginning; the worst was yet to come. The insurance plan that her new employer offered did not want to pay for treatment of a disease that was a result of her diabetes. Why?
"After you lost your previous job, you did not have insurance," an insurance company representative told a shaken O'Kelly.
"What do you mean? What about IAB?"
"Unfortunately, Miss, that is not an insurance plan, only a discount card," was the answer she received.
Lawsuits against IAB and its owner James Wood have already been filed by the states of Illinois and Texas. In order to avoid serious financial losses, Wood agreed to fulfill the requests of the complainants and also directed his 5,000 agents not to misinform future clients as O'Kelly and the thousands like her that had been misinformed.
The scope of duping citizens on the part of IAB and other similar companies has brought 12 states to take strict measures against swindlers. In 20 states, they are categorically forbidden to issue discount cards as insurance plans under threat of large fines.
As Business Week notes in connection with the new developments, the number of Americans lacking health insurance significantly exceeds 46 million, the most recent data released by the Census Bureau last fall.
The Iowa Policy Project determined that currently only 17 percent of temporary or part-time workers – seven million people – carry discount cards and not the insurance policies they had thought. And there is an enormous difference between the two, although a certain part of such medical coverage truly does save workers a specific amount of money when visiting doctors or paying for prescriptions.
Understanding how much their image has suffered from the dirty habits of their business colleagues, a group of discount card companies have united into The Consumer Health Alliance in an effort to regain the consumer's trust for their line of business. Companies in the Alliance have agreed to allow monitoring by their own ranks and to cooperate with state governments.
Unfortunately, the deception of the population continues. For example:
* willful misleading of the consumer in advertising materials;
* identification of doctors and hospitals that have not actually concluded any agreements with the discount card company as plan participants;
* deception in terms of the actual discount amount for services and medicine; and
* illegal acquisition of a client's credit or checking account information in order to get money from him/her even after the ex-client has refused the services of the discount card company.
