Skip to main content

FTC Cracks Down on Fake Health Plans

 |  By cclark@healthleadersmedia.com  
   August 12, 2010

A coalition of federal agencies has filed charges against three companies said to use deceptive marketing tactics to sell medical discount plans.

The cases were filed against Consumer Health Benefits Association (CHBA), Health Care One LLC, and United States Benefits LLC. In addition to these cases, the FTC and law enforcement agencies in 24 states have filed 54 lawsuits and regulatory actions to curb deceptive practices "to stop the scammers," the Federal Trade Commission said in a statement.

"With so many Americans struggling to deal with the costs of healthcare, these medical discount benefit plans sound appealing because they masquerade as health insurance," says 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."

In the first case, CHBA pitched consumers who found the company on the internet saying falsely that they worked with major medical insurers, that the plan was widely accepted by doctors, pharmacies and other health facilities and that it would save consumers up to 85% on medical expenses, according to the FTC statement.

CHBA also said the plan was accepted wherever Blue Cross Blue Shield was accepted and consumers could use their discount card with any health care provider that accepts insurance.

"Consumers paid between $29 and $280 in enrollment fees before they received written information about the plan," the FTC says. "When they tried to use the plan with physicians CHBA claimed were 'participating providers,' the providers said they did not accept the plan.  One consumer who tried to use the plan to buy prescription medicine discovered the 'discounted' price was higher than the price she had paid without the medical discount plan."

In the second case, a U.S. district court, at the FTC's request, ordered Health Care One LLC to stop marketing a discount plan that it "disguised as health insurance," the FTC says.  "Health Care One's promotional material implied that it was affiliated with the federal government and claimed that consumers who enrolled in the plan would receive substantial savings on health care costs."  In fact, those savings weren't possible.

Health Care One also claimed its plan was widely accepted by health providers in the consumers' communities, "but when consumers tried to get discounts from their providers, they discovered that the providers did not accept the plan."

"Health Care One induced consumers to pay hundreds of dollars to enroll by promising '100% satisfaction' and a 'money back guarantee,' " the FTC says.

Additionally, consumers found that it was difficult (if not impossible) for consumers to cancel the plans. If they did get their money back, a hefty processing fee was withheld.

Health Care One LLC and its affiliates were the target of charges in February filed by the California Department of Managed Care, the state agency governing managed care plans, which also accused the company of fraudulently selling discount health plans. The DMHC issued a cease and desist order for operating without a required license and for misleading consumers into thinking they were buying health insurance, which they were not.

"As a result of the DMHC's action, HealthcareOne LLC (as the company is called in California) and its affiliates have ceased offering tehir products in California, but federal action by the FTC was essential to address the problem nationally," according to a statement issued by the DMHC.

In the third case, a U.S. district court temporarily halted deceptive actions of United States Benefits, LLC after the FTC and Tennessee Attorney General Robert E. Cooper Jr. charged the company with selling medical benefit plans disguised as major medical health insurance. The agency says it seeks a permanent ban on the practice.

"The telemarketers claimed that the plan was available to all—including consumers with pre-existing conditions—and provided medical coverage with no deductible and no waiting period.  But when consumers received written information from the company, they discovered that instead of health insurance, they had purchased membership in a 'benefits association' consisting of healthcare-related discounts with little or no value."

United States Benefits charged consumers enrollment fees ranging from $100 to $500 and monthly fees ranging from $300 to $1,300, and when they complained or tried to cancel or get a refund, "they were ignored," the FTC says.

In the CHBA case, charges were filed against the National Association for Americans, National Benefits Consultants LLC, National Benefits Solutions LLC and Louis Leo, according to the FTC statement.

In the Health Care One case, other defendants named include Americans4Healthcare, Inc, Michael Jay Ellman, Elite Business Solutions and Robert Daniel Freeman.

In the U.S. Benefits case, other defendants named include Timothy Thomas and Kennan Dozier.

A representative for Health Care One could not be reached at press time for comment. A check with its Website said it "is temporarily closed for maintenance."

A spokesman for CHBA and United States Benefits could not be reached for comment.

Tagged Under:


Get the latest on healthcare leadership in your inbox.