Supporters of a new law that tightens regulations on medical discount plans say it will add transparency to a product that consumers often buy under the mistaken impression that it is health insurance.
But Thomas Sullivan, the state insurance commissioner, has expressed some concern over the law, which goes into effect Oct. 1. His office has received 45 complaints from consumers about medical discount plans since April. He’s worried because the state won’t be requiring marketers to get their marketing materials approved by his office.
While medical discount plans have become a popular alternative to health insurance nationally, they’ve also triggered a wave of consumer complaints.
The plans provide discounts on medical bills — usually 25 percent or less — from certain health care providers, but they do not make reimbursements on behalf of consumers the way insurance plans do.
Rules And Regulations
Connecticut has required medical discount plans to be licensed, but it hasn’t had regulations for marketing agencies that the plans often use to sell their products.
The new law requires each plan to disclose to the state all its contracts with marketers.
“This was done to protect consumers,” said state Sen. Joseph Crisco, D-Woodbridge, chairman of the insurance and real estate committee and a backer of the legislation.
The Connecticut State Medical Society also supports the law. “This creates transparency where it didn’t exist before,” said Matthew Katz, the organization’s executive director. “At least now state regulators will be aware of who is marketing these services.”
But Sullivan spoke against the legislation before it was enacted, asking for more consumer protection provisions. He said last week that some medical discount plans “are less than clear,” and the state should have required marketers to get their advertisements and brochures approved by his office.
‘Outright Fraudulent’
As it stands now, medical discount plan organizations will be responsible for that supervision. That’s worrisome because they have a vested interest in having their products sold aggressively.
Jim Quiggle, director of communications for the Coalition Against Insurance Fraud, agreed.
“There are far too many medical discount plans that continue to be shaky and outright fraudulent,” Quiggle said. Certain medical discount plans use “weasel wording,” in advertisements to deceive customers, Quiggle said.
Plans have been marketed as “health plans” or “health care” in an apparent bid to make consumers believe they are purchasing insurance, instead of a discount on medical services.
Sullivan said he’s concerned marketing agencies might employ similar tactics in Connecticut.
However, Crisco and Katz agreed many medical discount plans are legitimate, and they offer a worthwhile option for the nearly 9.4 percent of Connecticut residents who don’t have health insurance.
Crisco said the new law holds marketers to tough standards.
For example, a marketer must disclose how it plans to sell a plan and it is restricted from using advertising materials without a medical discount plan’s prior written approval.
A markerter must also clearly reveal to buyers the medical discount plan they work for.
The commissioner also has the ability to fine a medical discount plan organization or force them to stop using a marketer if that marketer violates a consumer protection law.
Growing
Controversy
Medical discount plans have stirred controversy in several states.
In Minnesota, for example, a dozen companies were ordered to stop doing business in 2005 after they were accused of using misleading advertising that tricked customers into believing they were buying health-care products.
Earlier this year, Wachovia Corp. agreed to pay an estimated $144 million to settle federal allegations that it failed to stop telemarketers, some of which were selling medical discount plans, from taking advantage of thousands of elderly consumers who complained that they never received the services they were promised.
Last year, California-based Prudent Choice was fined $150,000 and ordered to reimburse Montanans who bought fraudulent medical-care discount cards from the business.
New York, South Dakota, Maryland and Florida have had reports of similar problems.
Katz conceded Connecticut’s new law may not be perfect, but he said it’s a starting point for regulating marketers.
Crisco said that state legislators will continue to work closely with the insurance commissioner to monitor the medical discount plan situation.
“We could always address this in the future if we need to,” he said.
