09 August 2004
Health cards fuel mix-ups
Some buyers think discount plans are insurancetisement
In a country starved for affordable health care, the medical discount industry is booming.
Many health-care discount cards provide sizable savings on doctor visits and hospital stays to the growing ranks of uninsured Americans.
Yet the burgeoning industry is awash with misleading and fraudulent players.
While some companies clearly indicate the product is "not insurance," others drape Web sites, faxes and fliers in insurance jargon to describe a "health-care plan" free from restrictions, co-payments and deductibles.
Distinguishing medical discount cards from insurance can be tricky.
Just ask Carlton Johnson of Riverdale, who said he thought he was buying health insurance last summer for $89.95 a month, not a discount card.
"It's embarrassing because I'm an insurance agent," said Johnson, who has sold property, casualty and health insurance. "I was bamboozled and hoodwinked, and I'm a professional in it. Laymen do not stand a chance."
Evolving in the past couple of years from dental, vision and prescription discount programs, medical discount cards have largely been free from government regulation. Some states have started cracking down on illegal offerings, including Illinois, which requires discount card sellers to register with the state.
Like health insurers, discount card companies negotiate lower rates with medical providers, but patients pay the bills.
After getting his card from the Dallas-based International Association of Benefits (IAB), Johnson had surgery to repair a ruptured Achilles tendon. With the surgery and other medical care, he ran up charges of more than $10,000.
Then Johnson learned he didn't have insurance.
"I'm stuck with all these bills, and I really haven't figured out how I'm going to pay them," said Johnson, who recovered the fees he paid IAB after complaining to the Illinois attorney general's office.
Stories like this make Barbara Flood cringe.
As head of a discount card company and an industry association that promotes them, Flood said the untold story is how the cards have helped many individuals who can't afford insurance.
"Most people won't call a newspaper or regulatory body to say `I love my discount card,'" Flood said.
She said her company, Careington International Corp. in Frisco, Texas, and others in the industry address a real problem--uninsured Americans pay list price for medical care, while those with insurance enjoy deeply discounted rates.
On average, discount card companies negotiate savings of 35 percent with doctor and hospital groups due to the volume of patients they can steer to particular medical practices, Flood said.
The Consumer Health Alliance, the 11-company association Flood heads, estimates that 20 million people have discount cards, although that includes dental, vision and other types of plans. While several company officials said cards offering doctor and hospital discounts are the industry's fastest-growing segment, nobody has studied how many people have medical discount cards.
For Baka Fidanovski, having a discount card resulted in significant savings.
The owner of the Lakeside Restaurant in Antioch said his wife, Silvana, signed up his family for a Care Entree discount plan last year.
"We just don't have enough business to really afford insurance," said Fidanovski, 46. "We're trying to go without it."
When Fidanovski had hernia surgery last summer, the hospital bill came to nearly $7,500. The discount card knocked the bill down to $1,839.50.
Still, Silvana Fidanovski said she has an ongoing dispute with Care Entree about a separate bill from the surgeon. She said she was told by the company before the surgery that the doctor's bill would be discounted from nearly $2,000 to $495, yet that never happened.
A Care Entree spokeswoman said the problem occurred because the bill was not forwarded by the doctor to the company.
Roland Coston, Care Entree's vice president of business development, said Fidanovski fits into the primary market for medical discount cards, which includes the 44 million Americans without insurance and an additional 75 million "underinsured," such as those with high-deductible plans.
"Individuals are looking for an alternative," Coston said.
Cards have critics
While Care Entree works with Private Healthcare Systems, a network of more than 400,000 medical providers, many discount card companies falsely advertise that they have contracts with doctors and hospital groups. Other card companies have contracts, although individual physicians often aren't aware of the deals.
Mila Kofman, a professor at Georgetown University's Health Policy Institute, said the problem of companies making discount cards sound like insurance is getting worse.
"Consumers are desperate for affordable alternatives," Kofman said. "Many are dropping real health insurance for these medical discount cards. Some are misled into thinking they're buying real insurance."
Kofman is skeptical even of properly advertised discount cards, noting that patients without insurance can often get discounts from doctors on their own.
"Based on preliminary research, I don't see any real value," Kofman said.
Vincent DiBenedetto, president of Chicago-based Discount Development Services LLC, said it's unrealistic to expect patients to get discounts themselves.
"Most people aren't that sophisticated that they're willing to walk into a doctor's office and negotiate a fee," said DiBenedetto, whose firm provides services to discount plan companies that market the plans. "We've really legitimized that process."
The cost of belonging to a discount plan varies widely. Costco offers its members a plan for as low as $10.95 monthly, while other plans carry charges that approach $200 monthly.
Some plans are comparable to or cost more than health insurance.
Take the $89.95 monthly fee that 42-year-old Johnson paid for his discount plan.
To cover 80 percent of medical expenses, a Blue Cross and Blue Shield of Illinois plan would charge a 42-year-old man $88.41 monthly with an annual $5,000 deductible; $111.69 with a $2,500 deductible; or $149.21 with a $1,000 deductible, according to a report ordered by Zilinsky Financial Services in Crest Hill.
Johnson learned about the IAB discount plan from a program on gospel station WYCA-FM, which broadcasts in Chicago's south suburbs.
Pamela and Peter McDonald, who say they are independent agents for IAB and pastors, pay for the airtime and host the radio program. The couple has a network of 3,000 sales associates around country and annual membership fees of $3.5 million, she said.
Peter McDonald said a few of the IAB plans they offer include some insurance, including up to $2,000 for an accident, as well as $25 payments per doctor visit. Mainly, though, the plans offer discounts on medical services.
When presenting the plans, the McDonalds said they clearly describe the product as a discount plan, not insurance.
"I tell people we're like a Sam's Club for medical," Pamela McDonald added.
Yet during a program that aired Tuesday afternoon, she pitched the product as a way to get access to a "nationwide PPO plan" for only $89.95 a month, regardless of pre-existing conditions.
"God is here with a tremendous blessing," McDonald said.
What she failed to mention is that the blessing is not insurance, but a medical discount card where patients still have to foot the bill.
McDonald said in an interview that a PPO can be insurance or just a network of doctors. She added that an Internet search would show the phrase "fully insured benefits," which she talked about on the program, does not mean insurance.
"You can look up `insurance' and you'll get something different than when you put in `insured benefits,'" she said.
David Spruiell, IAB's vice president of corporate communication, said his company properly markets the discount cards.
"It's not and shouldn't be sold as insurance," said Spruiell, although he said he was unaware of the McDonalds' radio program.
The McDonalds said they have many happy customers.
Evorn Bradford, who lives in Chicago, said she bought a discount card through the McDonalds when she could no longer afford insurance but wasn't yet eligible for Medicare.
"I was a widow, and it saved me after I no longer had [insurance]," said Bradford, 65. "To me it's the wave of the future."
The industry and its critics expect discount cards will become more popular, particularly as similar products, such as Medicare's discount drug cards, become more widely accepted.
"I see this getting nothing but bigger," said Gerard Britton, chief of the Morris County, N.J., prosecutor's insurance fraud unit, who wrote a law review article about medical discount plans.
Scrutiny increases
Some government regulators have begun to crack down on fraudulent players.
Illinois has issued 10 cease-and-desist orders to discount card companies in the past year, and many more are under investigation, said David Grant, health-care coordinator for the state's division of insurance.
Illinois law already requires discount card companies to register with the state, and a recent wave of complaints has caused the state to push companies to comply with it.
IAB is not registered with the state, and an insurance department spokeswoman declined to comment on whether the company is under investigation.
While government authorities focus on the industry, it is becoming more complex. Many discount plans already come with some insurance for hospital visits. Others are linking with financial institutions so patients can charge health-care costs to credit cards.
"This is going to constantly morph as the government tries to catch up with it," Britton said.
Things to consider
Is it insurance, a discount plan or a scam? Be suspicious if the plan:
- Costs 25 percent or more below the norm, yet promises generous benefits and a large provider network.
- Accepts people with serious illnesses and other medical conditions that other plans probably would reject.
- Seems like insurance, but the agent promoting it avoids using the word "insurance" and instead talks of "benefits."
Is it a legitimate discount plan?
- Determine if fees and membership rates may cost more than the discount received.
- Be wary if the company's consumer hot line refuses to provide the address and telephone number of the discount health plan.
- Check that your current doctor, pharmacy, dentist and hospital participate in the program.
By Rob Kaiser
Chicago Tribune staff reporter
Sources: Illinois attorney general's office, Coalition Against Insurance Fraud
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