Health Plan Scams Spread Misery

Cora Nucci, August 18, 2010

This summer has been a scorcher for large swaths of the west, south, and east. For healthcare hustlers perpetrating a rash of insurance scams, August's heat has been particularly prickly. The Federal Trade Commission came down hard last week on scammers passing off medical discount plans as health insurance plans. Two dozen states are similarly cracking down.

"These medical discount benefit plans sound appealing because they masquerade as health insurance," said David Vladeck, director of the FTC's Bureau of Consumer Protection. "But they are not insurance. They don't offer the benefits of health insurance, and victims don't know they've been ripped off until after they've tried to use the service and paid their bill."

The FTC action has spurred authorities in other states to move against the bogus plans.  There are six related lawsuits in Indiana alone, according to the office of Indiana Attorney General Greg Zoeller.

Last week insurance investigators in Louisiana served cease and desist orders in a phony insurance scam involving a trade association, 13 companies and at least 14 individuals. They fraudulently marketed "medical discount plans" as health insurance plans, authorities said.

And back in February, California regulators blasted an Arizona company that issued discount health plan cards to California consumers, accusing the firm of fraudulently claiming the products being sold were insurance and offering services that didn't exist.

So far, the FTC and law enforcement agencies in 24 states have filed a total of 54 lawsuits and regulatory actions to halt scammers trading in fake health plans.

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