Lisa Truong's $28,000 bill from a San Francisco hospital is just one reason the California Department of Managed Health Care ordered two unlicensed companies offering fraudulent "discount health cards" to shut down and a third company selling health coverage to apply for a license or stop operating.
Additionally, the state plans to make a plea to hospitals, physicians, and clinics to have their intake workers report those instances when patients appear with such cards expecting they are covered, instead of letting the incidents slide unreported.
If the practice isn't stopped, patients will continue to have their credit records tarnished for non-payment, and hospitals and other providers will be left on the hook for increasing amounts of unpaid care, state officials said.
Truong, a 41-year-old legal secretary, has been paying nearly $60 to $209 monthly for six months to one of the companies, International Association of Benefits, whose agent told her the health card she was buying would pay her bills, she says.
When she needed a kidney biopsy in November, requiring a two-night stay, California Pacific Medical Center took her card information and admitted her for the procedure. But three months later, she learned the bill was not paid and she was getting letters from the hospital and her doctors saying she owed them $28,000.
The company apparently did pay two physicians who treated her for $75. But that's all.
The state has ordered another company, Prudent Choice, to shut down. And a third company, DentalPlans.com, has been ordered to seek a license and file an application by Sept. 15 or else it too will receive a cease and desist order.
Cindy Ehnes, director of the DMHC, said between 150 and 300 such companies are operating throughout the state, "defrauding tens of thousands of Californians. Their primary victims are usually limited English-speaking, lower income, and minorities employed in small businesses. These people generally do not have as much of an awareness of their rights, or who to call or what to do."
The businesses, sometimes called "discount health card companies," offer a membership program with lower fees for health providers such as doctors, dentists, drugs and hospitals, optical products, and "no pre-existing condition" limitations. While some companies offer legitimate discount cards, the problem companies offer such deals in the absence of having any contracted arrangement with the providers.
In Truong's case, the monthly premiums that started out at $67 a year ago, and was upgraded one month later to $209.95, were deducted from her debit card.
Companies of concern to the DMHC claim high discounts with risk-free cancellation policies and full refunds. Many use deceptive advertising as well.
"It's almost impossible to know how big this is, because it relies on victims complaining and knowing they can complain to the DMHC," Ehnes said. "The one thing we can say is that it's significantly underreported."
Truong, however, filed her complaint, which was immediately investigated. Her case helped Ehnes take action against IAB, which has been previously ordered to get a state health plan license, and while it initially began the process, has "since ignored repeated requests to make progress."
To date, the DMHC, the only stand-alone HMO watchdog agency in the nation, has filed cease-and-desist orders against eight such discount card companies, some of them headquartered outside the state, and is one of 14 states nationally that have taken action against such fraudulent activities.
The DMHC has jurisdiction over such companies because they promise to provide payment for healthcare services in exchange for periodic payments, which must comply with laws governing health plans.
More than half of the nearly 1,000 consumers that have complained about such practices to the DMHC say they were told they were purchasing a health insurance card, "only to discover that it is merely a discount and does not protect them from large medical bills," the DMHC said in a statement.
Much of the time, when the consumer tried to use the card, they learned the provider had had no contract with the company, or offered the same or better discount to any cash-paying patient off the street.
Especially now, with more people unemployed and without health insurance, such companies are preying on people with promises that don't hold up, Ehnes said.
She added that in those cases under investigation, "We've been able to get their finances and learned that they have been making a great amount of money."
For Ehnes, consumers like Truong are an important reason why health reform is so important. "The reality is, people are desperate for healthcare security and because of that, they are lip-smacking opportunities for these kinds of rip off schemes."