Health Discount Scams Targeting Those Seeking Low-Cost Insurance

health discountAs the nation's health care debate reheats, and effects of the recession grind on, state officials are battling scams that target consumers seeking low-cost health insurance.

Massachusetts Attorney General Martha Coakley has announced judgments against two New Jersey companies -- and three associated individuals -- for marketing and selling discount health plans disguised as insurance."Our office has received numerous complaints from consumers who have fallen victim to these deceptive discount health plan scams where companies purport to offer health insurance but do not," Coakley said in a statement, on March 2.

In the scam, the sellers advertised "Low Cost Quality Health Care for the Individual & Entire Family." They slugged their product as "Top Rated Insurance."

According to Coakley's office, however, the discount plans they sold required buyers to seek specific health care products or services from certain providers for a fee. They might get a discount, but the purchasers paid all the costs themselves.

Not only is that not insurance, according to Coakley's office, it left buyers without the proper coverage to meet standards of Massachusetts' 2006 mandate for all residents.

In the judgments, the companies and individuals -- National Alliance of Associations and Professional Benefit Consultants, Inc., operated by Thomas Sullivan, James Doyle, and Christopher Ashiotes -- must pay nearly $150,000 to their victims, in addition to more than $300,000 in penalties and fees.

It's not the first time states have take action against the three men.

In 2008, the Kansas Commissioner of Insurance issued a cease-and-desist order to stop the three men, and their companies, from selling insurance to state residents. The order labeled their practices and materials: "deceptive and misleading."

Coakley's office is litigating multiple other similar cases.

In 2009, she filed suit against four companies allegedly peddling discount medical plans to consumers with pre-existing conditions -- plans that also don't make the cut in Massachusetts.

State consumer protection and insurance officials offer the following tips to avoid being duped by health insurance scams:
  • Don't be fooled by "discount plans" or cards. They are not an alternative to health plan coverage, they pay nothing toward a medical claim, and they fall outside federal regulation.
  • State officials say you should never reply to unsolicited faxes, emails, or phone calls that request personal information in connection with an offered plan.
  • Look for telltale signs of a scam: advertising that's missing a specific business name and address; high-pressure tactics like limited-time offers; and resistance to requests for written information.
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