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.
So-called discount health plan scams are proliferating under near-perfect conditions: economic stress, high unemployment rates, and the regulatory turbulence stemming from healthcare reform legislation. And it's not consumers alone who are being preyed upon. Providers and hospitals are being defrauded.
Medical discount plans are so bad in the eyes of the California Medical Association, that the group has opposed attempts at regulation and licensing.
Sure enough, the matter of regulation was on the agenda at this month's Seattle meeting of the National Association of Insurance Commissioners (NAIC). The group's Antifraud Task Force intends to draft a national standard that discount plans would have to meet to do business and the NAIC plans to "look further into what regulators can do" to address the rash of scams, the group's web site says.
It shouldn't bother. Discount plans prey on poorly informed consumers and create service delays and headaches for busy providers. Only the issuers stand to benefit from these bogus health insurance plans. Regulation would unleash even more misery on hospitals, providers, and consumers.