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.
Companies would have to subject all marketing and sales materials to the MHC for approval, and may not use words such as "insurance," "coverage," "copay," "premium," or "HMO" in their sales pitches.
The state also would set how much of a discount the companies must offer, and that in general, it would be "at least" 20% off the full billed charge, and less than 2009 Medicare rates in the geographic area.
The company must also clearly state that the subscriber or enrollee may have to pay for all healthcare purchases at the time services are rendered in order to receive the discount, and maintain a toll-free customer call center to provide direct confirmation of provider discounts. The companies also would have to provide language interpretation services.
And the plans would be required to refund prepaid or periodic charges upon cancellation up to at least 30 days following enrollment.
Complicating the issue, however, is that five companies now operate what Ehnes considers to be legitimate, licensed discount health plan businesses in the state, providing access to less expensive healthcare services to millions. But the CMA says a 2001 opinion from then-Attorney General Bill Lockyer that such plans are illegal on their face.
Ehnes spokeswoman Lynne Randolph counters, "A 2001 opinion is seriously outdated, given the level of sophistication and the depth of fraud that unlicensed discount plans have heaped upon California consumers in the last 10 years. Their business models have evolved to the level that even an attorney has a difficult time distinguishing from a legitimate plan."
Besides, Randolph says, "There has been an administrative law judge decision in 2006 that these discount plans do provide a health service, and should be licensed by the DMHC."