Connecticut’s new law regulating medical discount plans doesn’t go far enough in protecting consumers from unscrupulous marketers who have an incentive to misrepresent their product.
In recent years, medical discount plans have become a popular alternative to medical insurance policies, which cost more and actually cover claims. The discount plans are most definitely not insurance. They merely reduce the price a consumer must pay on a medical bill, usually by less than 25 percent within a limited circle of medical providers. The consumer is still responsible for paying the bill.
There may be a legitimate place in the market for medical discount plans, so long as consumers understand the product’s limitations and regulators keep a tight rein on those who profit from selling it.
Unfortunately, Connecticut’s law leaves the door wide open for aggressive marketers who stand to gain by blurring the distinction between a discount plan and insurance. Under the law, which takes effect Oct. 1, marketers who peddle cards to consumers on behalf of a plan won’t have to have their marketing materials approved by the insurance department.
While the law will hold plans responsible for any illegal practices carried out by their marketers, it doesn’t give state regulators sufficient direct control over marketers who bend the rules.
Consumer complaints in New York, Maryland and Florida, among other states, show that direct oversight is clearly warranted. The most common complaint, surveys have found, was that consumers who bought the plans were under the mistaken impression they were buying insurance. What a surprise!
Legislators who enacted this weak law have a duty to carefully monitor its effects. They should be prepared to amend it when consumers raise a fuss about its shortcomings.
