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Discount Health Plans Not What They Seem

Complaints are on the rise

By Florence Klein
Florence Klein
Courtesy of Florence Klein, Founder,

It’s only been a couple of months since we wrote about the reported potential for more scams related to the new health insurance reform legislation. Since then, more problems involving fraudulent discount health plans have been rising to the surface.

Authorities in more than 25 states are investigating American Trade Association (ATA) and have uncovered what they believe is a “deep well of scams” that allegedly ensnared 12,000 people who paid about $14 million in premiums to this insurance company, according to a Kaiser Health News article. A number of state investigators have also ordered Consolidated Workers Association and HealthcareOne (the parent company of Easy Life) to cease operations because of similar frauds.

Minnesota’s attorney general has filed lawsuits against two companies, Direct Medical Network Solutions and Association Healthcare Management Inc (d/b/a Family Care), for “deceptively” marketing limited discount plans “in part by misleading (consumers) into believing that the plans are health insurance or insurance-like products,” according to the attorney general’s press release.

The Missouri Department of Insurance is warning consumers there of a door-to-door salesman claiming to be a federal agent selling insurance under the new health care reform law.

California has reportedly received more than 1,000 complaints about discount health plans since beginning an investigation of the products in 2004 and has ordered 18 discount health plan companies to cease operations in the state or get licensed.

Getting to the bottom of who’s responsible is also part of the problem. According to the Kaiser article, “Officials seeking to crack down on misleading practices face some of the same confusion that many consumers do, especially when trying to figure out who is running a company.”

For example, Kaiser reported that ATA’s insurance is underwritten by Serve America Assurance, the Bermuda-based subsidiary of Beema, a Pakistani insurance company. “Authorities are still somewhat unclear whether Beema and Serve America are legitimate operations,” according to the Kaiser article. “Oklahoma officials said they have received one letter from Beema confirming it served as ATA’s underwriter, and another denying any links to them.”

Another example Kaiser points to is Easy Life Healthcare. This company is just one part of Healthcare One, LLC, which, according to the Texas Department of Licensing and Regulation, is a private label marketer that sells plans provided by another company, Careington International Corp. of Dallas, which Healthcare One lists as the “administrator” of its product on its Web site.

The Coalition Against Insurance Fraud, a consumer advocacy group, has documented the change for the worse. The coalition surveyed state insurance regulators in October 2009 and found that 57% of state fraud bureaus reported a higher incidence of health insurance fraud in 2009 compared to the previous year and that the rise in bogus health plans was “greater than any category of insurance fraud.”

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