WASHINGTON - U.S. regulators are cracking down on a growing number of companies that fraudulently sell so-called medical discount plans by telling consumers they work like health insurance and cover medical costs.
The Federal Trade Commission said Wednesday it is working with 24 states to crack down on sellers of medical discount plans who market them as health insurance that covers doctors, hospitals, and other services.
Such scams have increased in the wake of the health-care reform law passed in March, said David Vladeck, director of the FTC's Bureau of Consumer Protection. It requires people to have health coverage, starting in 2014.
"The uncertainty about the benefits that will be available under the new federal insurance program and the fact that the budget doesn't kick in until 2014 is going to give scammers very fertile ground for this," Mr. Vladeck said. "They're going to try to capitalize on uncertainty."
The Obama Administration is trying to prevent companies from taking advantage of consumers over health reform. It has warned traditional insurers not to use the law as an opportunity to push through big rate increases. Such companies include WellPoint
Inc., Aetna Inc., and UnitedHealth Group Inc. The FTC and several state attorneys general have filed lawsuits against companies they say mislead consumers by selling medical discount plans which offer some savings but are described as insurance accepted by doctors, hospitals, and others.
The companies targeted by the FTC and states are mostly privately owned and include Health Care One, Consumer Health Benefits Association, and United States Benefits. The FTC and states have taken 54 lawsuits and other civil enforcement actions, officials said.
James Wrynn, New York insurance superintendent, said some discount plans offer limited payments for some health-care expenses such as medical tests or short hospital stays, "but when you find out the extent of the coverage, there is for all intents and purposes, no coverage."