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Discount health plans under fire from FTC and states

Lawsuits against three companies say customers pay for worthless memberships, leaving them poorer and still without coverage.

By Emily Berry — Posted Sept. 1, 2010

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Federal authorities have joined state regulators and attorneys general in pursuing discount health plans that authorities say are deceiving customers into believing they have health insurance.

In fact, the lawsuits say, victims pay for basically worthless memberships, leaving them poorer and still uninsured.

These discount plans are capitalizing on consumers' anxiety and confusion in the wake of health system reform, said Lois Greisman, associate director of the division of marketing practices at the Federal Trade Commission (link).

Greisman said physicians can help patients avoid paying for discount plans that aren't what they seem. "People go to physicians for information," she said. "They can make sure existing patients they know who might be losing insurance don't get a medical discount plan."

"Operation Health Care Hustle," as it's been named by the FTC, consists of three federal lawsuits filed by the FTC and 54 state actions against discount health plans (link).

The cases were announced in mid-August.

The companies named are:

  • Consumer Health Benefits Assn., of Coconut Creek, Fla., which the FTC lawsuit said has been selling discount plans since 2003.
  • United States Benefits, a Nashville, Tenn., company that the FTC said has been selling memberships since at least 2007.
  • Health Care One, a Tempe, Ariz., company that the lawsuit says has been selling memberships since 2006.

Meanwhile, insurance commissioners and attorneys general in 24 states have taken action against those three companies and other discounters.

The FTC alleges that the companies sold discount plan memberships using high-pressure sales tactics, then charged enrollment fees and monthly fees that they arranged to have automatically deducted from customers' bank accounts. When customers discovered that the promised networks and discounts for medical care were a sham, the companies made it extremely difficult for unhappy customers to cancel and receive refunds, the lawsuits say.

Federal judges signed temporary restraining orders enjoining all three companies from further sales and placing them in receivership.

Representatives for Consumer Health Benefits, Health Care One and United States Benefits did not return phone messages.

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