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Report: Many Discount Medical Cards a Sham

Savings are elusive, with consumers often told outright lies

FRIDAY, March 11, 2005 (HealthDay News) -- Consumers buying discount medical cards are encountering a host of problems ranging from deception to outright fraud, a new report finds.

"Consumers sign up, and most of the time they really get nothing and they pay for it," said Mila Kofman, lead author of the research released Friday.

"One card told us they provided $10,000 in hospital coverage, which was just flat out a lie," continued Kofman, who is an assistant research professor at Georgetown University's Health Policy Institute, which did the study for the Commonwealth Fund.

"You couldn't get a list of providers. We had to call them, wait sometimes a week for them to call us back, and then five providers told us they didn't participate," she added.

To reach their conclusions, the researchers tested out five of the nine cards available in the Washington, D.C., area for three months last fall. In each instance, they enrolled, used the health care services and then canceled the card.

The findings have led Kofman and others to call for tougher regulations. "We need full licensing for these companies, full regulations for these products," she said. "Right now, it's virtually unregulated, so if there's a problem like unauthorized withdrawal or unauthorized charges on a credit card, there's almost no one to complain to."

The problem is that the cards are fairly new to the market, new enough for lawmakers not to have caught up. "They haven't been around long enough for states to have adopted meaningful regulation," confirmed Sandy Praeger, insurance commissioner for the state of Kansas.

Not to be confused with the Medicare prescription drug cards, these medical discount cards promise more general savings, including discounts on doctor's visits and hospital visits, and can be purchased by anyone with the money to buy them.

Members supposedly benefit from a group discount and must pay $13 to $148 per month per single person and, often, a non-refundable enrollment fee, which can climb as high as $200.

After reviewing marketing materials, using the five different cards and interviewing regulators and government officials, Forman and her co-authors concluded that the services actually offered are not always what is promised.

The initial marketing is often misleading and sometimes amounts to outright fraud, Kofman said. Companies use high-pressure sales tactics, sometimes make inaccurate statements about the cards as well as exaggerate the savings to be had.

Three cards did not provide a list of doctors prior to enrolling, the researchers found, and after enrollment, some companies provided information that proved to be inaccurate. To get a list of providers, the researchers often had to call the company several times. Some discounts were less than initially promised, they said.

On one card, only 16 of the 44 doctors on the list provided by the company actually honored the card; of those, only nine divulged an estimated discount. Some doctors couldn't be contacted because the phone numbers were wrong or the physicians were no longer in practice. And only for one card did all the listed providers confirm that they would provide discounts.

In addition, they found, there appeared to be no correlation between the price of the card and the amount of savings. In other words, an expensive card did not necessarily confer greater savings.

To compound matters, many consumers believe the cards are insurance -- which they are not -- and therefore are regulated, Kofman's team added.

The experiences of the study authors jive with what insurance overseers are hearing, Praeger said.

According to the report, Florida reported almost 800 consumer inquiries and complaints involving discount cards, during one nine-month period. One card program in New York advertised savings as high as 90 percent. That state's Attorney General, however, found that typical savings were closer to 15 percent off the customary rate. Montana has shut down 11 companies for selling cards without a network.

On the other hand, some discount medical card companies are themselves in favor of standards that would make the industry more reputable.

And some states already have regulations in place. Kansas, for instance, requires advertising that clearly states the cards are not insurance and also requires companies to provide a list of providers up front.

But often this type of action only comes after the fact, the experts say.

"The legitimate are performing correctly, but the illegal are very elusive," Praeger said. "By the time you find out about it, the phone number has been disconnected and the office is closed."

She cited one case where her office traced an 800 number to Nova Scotia. "Clearly, that's outside our jurisdiction," she said.

The National Association of Insurance Commissioners is working on a model for regulation, she said, adding that "regulation usually comes about because people don't perform like they're supposed to, and it's unfortunate."

"Consumers are buying and will be buying in the future, I'm guessing, because they are desperate," Kofman said. "They need to be protected.

More information

Visit the Commonwealth Fund for the full report.

SOURCES: Mila Kofman, J.D., assistant research professor, Health Policy Institute, Georgetown University, Washington, D.C.; Sandy Praeger, commissioner of insurance, state of Kansas, Topeka; March 11, 2005, report, The Commonwealth Fund,
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