Date: August 9, 2005
For more information contact: Eileen Mallow, Assistant Deputy Commissioner, (608) 266-7843 or eileen.mallow@wisconsin.gov

Advertised Discount Health Plans May Not Be All that They Claim to Be

Insurance Commissioner Cautions Consumers about Discount Health Plans

Madison, WI—As health care costs increase, discount health plans, such as discount cards, advertised on television, radio, faxes and telephone may seem to be a plausible alternative. The ads for these plans use language that is commonly associated with insurance, such as "coverage" and "premiums," and tend to mislead consumers to believe these plans are insurance or provide coverage comparable to health insurance. The Commissioner of Insurance, Jorge Gomez, urges caution with these plans, as they are not insurance and are many times fraudulent.

"These discount plans often make grossly inflated promises about savings and benefits. Rates that sound too good to be true, almost always are," said Jorge Gomez, Commissioner of Insurance. "A red flag is that the ads do not list the name of the company offering these plans or the providers willing to accept the discounts. You should always be suspicious of any ad, anywhere, that does not list the name of the company or provider."

Some signs that a plan may be fraudulent are:

• The discount plan is advertised through blast faxes, spam e-mails, Internet pop-ups or signs posted on telephone poles.
• The company does not provide sufficient information to allow you to get a refund if you change your mind and want to cancel your application and obtain a refund.
• The company claims you can save a considerable amount on health insurance.
• The company or agent will not give you a list of providers until after you purchase the plan.
• The company uses high-pressure marketing and an extreme sense of urgency, telling you that you "must act now" or "this one-time offer."
• You are asked for debit or credit card information or a large up-front fee.
• If it seems too good to be true, it probably is!

Contrary to what many illegitimate discount health plan issuers claim, discount cards do not pay medical claims. Instead, enrollees are responsible for paying for services at the time care is received. Some discount plans may exaggerate the savings potential and promise discounts that might not be available. Also, many of these misleading discount plans do not cover all types of services or conditions, and may claim to include providers who are unaware of their supposed participation in these plans and refuse to accept the card. These plans often have significant application fees that are often non-refundable if enrollees choose to cancel.

Not all discount plans are fraudulent, though. Some associations, banks, employers, insurance carriers, and others offer discount cards at little or no cost as an added value for their consumers. These legitimate card issuers will state on all their marketing material "This is not insurance," and they will never suggest you drop your health insurance. Legitimate discount cards also will not mandate large application fees or up-front costs.

Consumers who have questions concerning discount plan advertisements they have received or who are evaluating similar offers are encouraged to call the OCI Information and Complaints Hotline at 1-800-236-8517 for information about the limitations of the cut-rate plans.

OCI publications, such as "Consumer's Guide to Insurance," "Health Insurance for Small Employers and Their Employees" and "Insurance Complaints and Administrative Actions," can be ordered free from the agency by writing to OCI Publications, P.O. Box 7873, Madison, WI 53707-7873, calling 800-236-8517 or visiting the OCI website at oci.wi.gov.

Created by the Legislature in 1871, Wisconsin's Office of the Commissioner of Insurance (OCI) was vested with broad powers to ensure that the insurance industry responsibly and adequately met the insurance needs of Wisconsin citizens. Today, OCI's mission is to lead the way in informing and protecting the public and responding to its insurance needs.