Fraudulent medical discounts discussed

Md. insurance chief holds hearing on shady sales of medical, pharmacy cards

May 28, 2004|By M. William Salganik | M. William Salganik,SUN STAFF

Open enrollment. All pre-existing conditions accepted. No co-payments or deductibles.

Sounds like a good deal on health insurance.

Except it may not be health insurance. And it may not be a good deal.

Maryland Insurance Commissioner Alfred W. Redmer Jr. conducted an informational hearing yesterday into the proliferation of medical and pharmacy discount cards. During the past decade, a number of insurers, pharmaceutical companies and others have offered legitimate programs to provide discounts on prescriptions, dentistry, eyeglasses and other health services.

But, "what some would call a `market innovation' is actually a dream come true for criminals," Mila Kofman, a health policy professor at Georgetown University, said at the hearing. "Because discount medical cards are not insurance policies, such products are not regulated like insurance products, and companies who sell discount cards are not subject to the same level of scrutiny as insurers are subject to."

Redmer said the hearing, and studies being conducted by his department in conjunction with the state attorney general's office, could lead to legislation to clarify how discount programs are monitored in Maryland.

About 20 states have such laws, Allen Erenbaum, general counsel for the Consumer Health Alliance, a trade association for companies offering discount cards, told the hearing at the Community College of Baltimore County's Essex campus. Erenbaum and Angela Franklin, director of state policy for the insurance trade group America's Health Insurance Plans, said they favored aggressive state laws and regulations to stop misleading or fraudulent discount cards.

Among problems noted at the hearing were deceptive advertising; card operators who don't have a network of doctors and pharmacies that agree to offer discounts; and companies that use credit card or bank account numbers from members to assess hidden charges. Also, witnesses said, consumers sometimes believe they are insured, only to find out that, after the discount, they are responsible for paying the rest of the cost of expensive medical procedures.

Kofman and others who testified said there is no clear data on how many consumers have been victimized by fraudulent or misleading discount programs. However, they said, it is clear that programs are being aggressively marketed, often by unsolicited "blast fax." Erenbaum, Kofman and even Redmer said they had received suspicious faxes in their offices.

Sammie Mouton, acting director of the Health Education and Advocacy Unit for Maryland's attorney general's office, said her unit received 13 complaints about health discount cards last year and was on a pace for double that number this year.

In one case last year, she said, the attorney general's office got $46,000 in dues payments refunded to Maryland consumers by a medical discount card company that had exaggerated its benefits. The settlement agreement also specified that the company couldn't sell memberships in Maryland unless it had its programs and marketing materials approved by insurance regulators.

One of Redmer's investigators, P. Todd Cioni, associate commissioner for compliance and enforcement, said he had called one of the companies to try to get documents detailing the benefits and was told he would have to give his credit card number before the company would send him information.

Several witnesses said they were concerned that the potential for confusing consumers will increase with the presence of dozens of new, and legitimate, Medicare pharmacy discount cards.

"If it seems too good to be true," said Jolie H. Matthews, associate counsel for the National Association of Insurance Commissioners, "it probably is."

Warning signs

Factors consumers should consider to help distinguish between suspicious and legitimate medical and pharmacy discount card offers:

Demands for credit card or bank account numbers. Fraudulent operators might use such numbers to assess hidden charges. Some demand account information from consumers before even supplying enrollment information.

"No limitations, no pre-existing conditions." Extravagant claims in marketing materials should be a warning to consumers.

Company doesn't list an address. Legitimate insurers and discount programs will tell consumers where they are located.

"Offer good until Friday." Legitimate insurers don't try to rush consumers into signing up.


Attorney general's health advocacy hot line, 410-528-1840.

Maryland Insurance Administration consumer complaint office, 410-468-2000 or 1-800-492-6116.

America's Health Insurance Plans trade association's fraud Web site:

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