Discount health plans aren't insurance

Director of the California Department of Managed Health Care, the state's HMO consumer rights organization, Cindy Ehnes.

TEXT OF INTERVIEW

Tess Vigeland: Who knows when, if, we'll ever have health care reform. Meanwhile, millions of people looking for coverage are turning to something known as "discount health plans." They're available in all 50 states and they promise affordable health care coverage. But many times, those promises aren't worth the paper they're printed on. It's becoming a big issue in California. Some six million people have bought the discount plans.

Here's a clue as to where the problem lies. We called the California Insurance Commissioner's office -- and they told us they have no oversight, because this is not insurance!

So Cindy Ehnes joins us. She's the Director of the California Department of Managed Health Care. Welcome to the show.

Ehnes: Hello, Tess.

Vigeland: What are these "discount health plans" and how are they being confused with insurance?

Ehnes: Well, a discount health plan promises deep discounts from doctors, hospitals and pharmacies. But when an individual tries to use the discount card, they learn that the provider to whom they are referred never heard of the discount plan, has no agreement with them to offer discount prices or would offer the same or a better discount to any cash-paying patient. And so here's an individual who has been paying up to hundreds of dollars a month for something that they believed had inherent value and often, are represented to believe that it is in fact insurance.

Vigeland: How big is this problem? Is it affecting a lot of people?

Ehnes: Well again, we have no reason to believe that California is unique in having approximately 150 companies currently doing business in the state of California and many of which, we believe are operating in a less than fair fashion. And we have no reason to believe that it isn't a big a problem nationally. We know that we are one of approximately 21 states that are moving to take steps to rein in this fraudulent activity.

Vigeland: What is the legitimate use of these plans?

Ehnes: Well, a legitimate use would be a discount that in fact does correspond perhaps to a particular clinic, to a particular hospital or pharmacy, that is deeper than the discount that would be offered to any uninsured, cash-paying patient off the street. Someone who is insured, in general, is not going to require that discount health card.

Vigeland: What can your office to do crack down on these plans?

Ehnes: Well, what we have been doing is issuing cease-and-desist orders to currently 17 fraudulent discount health card companies. And we have said, "Look, you come in and you at least show us that you are not a fraudulent company, and we will allow you to continue to do business." That has allowed us to do then clean up the activity of a large number of the players out there that we, again, assumed were the worst behaved.

Vigeland: What are the red flags for people to watch for if they're considering buying one of these memberships?

Ehnes: Well, first of all, if something comes over in the form of a blast fax to a business, that is a high red flag. That is, in fact, one of the main marketing mechanisms that is used. If in fact someone is on the phone and is being told that this is insurance and the rate for that product is up $150 a month, that should be a red flag that, in fact, there's some additional questions that need to be asked.

Vigeland: Cindy Ehnes is the director of the California Department of Managed Health Care. Thanks for walking us through this.

Ehnes: Thank you, Tess.

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