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Doctors Oppose Proposed Discount Health Plan Regulations

Cheryl Clark, for HealthLeaders Media, February 23, 2010

The influential California Medical Association is trying to block a state effort to strengthen licensing of so-called "discount health plans," saying the regulation would legitimize a business model that's often fraudulent, illegal, and impossible to police.

"Discount health plans are not health plans, not health insurance, and frequently not even discounts," said CMA president, Brennan Cassidy, MD. "These plans are dangerous deceptions for patients, who think they are getting some benefit or coverage, but in fact are getting absolutely nothing."

For doctors, they've been a nightmare, says Armand Feliciano, an attorney for the CMA. Feliciano says doctors routinely treat patients who then pull out insurance cards that supposedly entitle them to a discount on the physician's fee.

"But the doctor then says ‘I never agreed to this,' and all of a sudden, the patient is mad at the doctor—and neither one is at fault. The doctors get caught in the middle," Feliciano says.

The health plans are not plans at all, because no insurance company bears the risk and there is no premium, Feliciano says. Feliciano wants the state to seek legislative authorization to regulate the discount card industry, saying that on eight prior occasions, proposed bills failed to get enough votes.

The deal ostensibly allows the patient to pay less than the full price the provider usually charges, in exchange for paying upfront and regular monthly fees.

In the last several years, the California Department of Managed Health Care, which proposed the new regulations, has issued cease and desist orders to 17 such companies that have sold plans. Another 18 investigations of other companies are underway.

At a news conference Monday, DMHC director Cindy Ehnes said her agency's proposed regulations are among the nation's toughest. Up to now, the agency "has been very aggressive, but the next step is a strong regulatory framework, and to those who choose not to become licensed, they will be stopped," she said. She added that thousands of Californians have been duped, and millions of dollars lost.

Some 6 million Californians have reportedly bought discount cards, and many have ended up paying full price. What's more, efforts to get the companies to stop withdrawing monthly premiums have gone on for months.

A major problem, Ehnes says, is that many times the state has closed an operation only to see it "pop up somewhere else. All you need is a call center and a fax machine; it's a simple, inexpensive operation," she said.

Discount health plans have mushroomed in recent months as more people have lost regular health insurance, either because they were laid off or their employers stopped offering coverage.

If approved, the regulations would allow the DMHC to require companies to publicly publish quarterly updates online of all physicians who agreed to honor the cards and provide discounted medical services.

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