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									                                 DISCOUNT HEALTH CARDS


Although discount health cards are often confused with health insurance, these cards do not
actually provide health care coverage. Discount health cards are simply a means of letting
consumers—who pay a fee, usually monthly—purchase health care products and services
from specific providers at rates that are supposed to be discounted. Insurance, on the other
hand, is a legal contract between the insurer and the insured (an individual or group): the
insurer agrees to pay for specific health care expenses incurred by the insured who pay a
monthly premium.

Discounted Services and Products
Discount health cards may offer a discount one either a single service or multiple services,
such as hospital, medical, dental, and eye care services as well as prescription drugs and
contact lenses; card holders can receive the discounts only from those doctors and other
providers who have agreed to honor the discount card. Discount health programs can be
useful to some people, including those who have a health insurance policy but who want to
reduce their expenses for non-covered services such as eye glasses: as long as consumers
understand what is being purchased and as long as the product is legitimate, i.e., it provides
the discounts promised. Not all card sponsors have delivered the promised discounts,
however.

Card Marketing
Discount health card sponsors typically market the cards with flyers on signposts, through the
mail, on television, via facsimile, and over the Internet. The text may be misleading, for
example, “Coverage for the Entire Family for $59.95 a Month!” The advertised rates are low,
much lower than health insurance premiums, because the product does not provide the
benefits an insurance policy provides. Yet most consumers are not familiar enough with health
insurance to question the legitimacy of the claims, even with the disclaimer “This is not
insurance.” The prominent terms in the advertising— “benefits,” “no exclusions for pre-
existing conditions,” and “coverage,” terms often used with actual insurance policies—can
overshadow a disclaimer in fine print.

Reported Problems
Not surprisingly then, consumer health assistance programs have reported many complaints
about discount health cards. For example, many providers contend that they do not have a
contract with the card sponsor to provide discounted services to cardholders, and the
consumer does not receive the anticipated discounts. No matter the reason for the providers’
claim—whether a practice in the discount card’s network was sold without the knowledge of
the discount card sponsor or whether there was never an agreement with the provider—the
end result is that consumers are charged the full cost of services.

Considerations for Consumers
Consumers who are considering buying a discount health card should understand the following
points:
      The card sponsor never pays for services as an insurance company pays claims.
      Discounts may not be guaranteed.
      Federal and state protections may be limited; your state’s insurance department and
       attorney general’s office can explain what protections your state provides.
      Releasing any credit card information to the card sponsor may result in excessive or
       unauthorized charges.

To avoid any misunderstandings about these products, cons umers should read all materials
related to the discount health cards under consideration and ask the following questions:

      What does the card cost me?
      How will it save me money?
      Is there a “money-back guarantee” period?
      Can I cancel the card at any time without any penalties?
      How does my discount card work if I also have a health insurance policy?
      How do I find out the discounted amount before receiving services?
      How are discount percentages derived?
      Do I have to pre-pay for services in order to receive the discount?
      Are the discounts guaranteed?
      Does the card sponsor selling the product need to be licensed to do business in my
       state, and, if so, is the sponsor licensed?
      Is the discount card subject to any laws and regulations that may protect me from
       fraud?
      Whom do I call if I have a problem with the program?

It is crucial for consumers to understand what they are purchasing with a discount health card,
given that states generally do not regulate discount health cards as they do insurance
companies. A few states do require agents who sell discount cards to register with the state’s
insurance department or require that the plans themselves be registered or licensed You can
contact your state’s insurance department to learn if they have any authority.

States that require card sponsors to register to conduct business in their state may have some
leverage over card sponsors. (You can often find your state’s registration requirements, if any,
through your state’s Secretary of State office or the office that regulates businesses, or the
department that regulates insurance, http://www.naic.org/state_web_map.htm. In some
states, as noted, the Department of Insurance requires card sponsors to register.) In 2006, the
National Association of Insurance Commissioners is considering model state legislation to
require licensure and regulate the marketing activities of discount medical cards; states that do
not regulate sponsors may choose to adopt such legislation in order to protect consumers
better.

Actions for Consumers If Problems Occur
If consumers believe they are the victim of fraud or misrepresentation, they should contact the
consumer protection division in their state’s Attorney General’s office,
http://www.naag.org/ag/full_ag_table.php. Consumers can also contact the Federal Trade
Commission (FTC), which can investigate charges of false advertising, at 1 -877-FTC-HELP
(382-4357) or at www.ftc.gov. (The FTC has already taken action against some discount
health card sponsors.) Consumers may also want to contact the FTC if they receive
unsolicited advertising over a fax as such transmissions may violate the Telephone Consumer
Protection Act.

Consumer Tips and Alerts

      The Commonwealth Fund (March 2005)
      Federal Trade Commission
      Better Business Bureau
      Utah Insurance Department
      New York Office of Attorney General
      Vermont Department of Banking, Insurance, Securities & Health Care

Example of State Regulation of Discount Health Plans

      Utah


Notes from a Conference Call with Consumer Health Assistance Programs
    March 2004 - Unregulated and Discount Health Plans

								
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