N.C. Commissioner Issues Warning About Discount Health Insurance Plans

Seven North Carolina Better Business Bureaus and 148 Chambers of Commerce are receiving letters of caution from Insurance Commissioner Jim Long urging them to warn their members and citizens about the differences between legitimate health insurance and the increasingly common “discount plan,” a product often is marketed almost as if it is insurance, offering benefits at a low monthly rate.

While some of these plans are legal, they are significantly different from actual insurance and provide drastically different benefits. Many consumers, however, are fooled into thinking they are purchasing insurance at a low price, and are surprised to learn the discount plan may cost them more in the long run.

“It is becoming apparent that promoters of health care scams often target small business owners and self-employed individuals,” Long said in his letter to the BBBs and Chambers. “Because of the recent proliferation of this very problem—the marketing of what is known as ‘discount health plans,’ which look very much like health insurance at great rates—I am contacting you with information I hope you will use to better inform your constituents.”

Some differences between health insurance and a discount plan include:

• Discount plans are generally much cheaper and may be marketed on telephone poles or in elevators, on signs beside the road, in spam emails or over the fax machine.

• Discount plans are only accepted by a limited number of doctors, facilities and other health care providers.

• If your doctor or facility does not accept the plan, you will have to pay the full cost for services out of your own pocket.

• Unlike insurance, which can cover most or all of the bill for approved services (after deductibles, coinsurance and/or co-payments have been paid), a discount plan provides only a discount off of the health care provider’s full fee. You are still responsible for paying the majority of that fee at the time of your visit. Discount plans generally do not process medical claims or issue reimbursement to health care providers.

While discount plans can provide valuable benefits for some, they aren’t for everyone. You should consider carefully before signing up with one, warns Long, and you should also be on the look out for “red flags” that could signal a fraudulent plan.

“Red flags” that should cause you to question the discount plan include:

• Questionable advertising practices, such as blast faxes or spam emails.

• Exaggerated claims of huge savings on health care products and services.

• Refusal to provide you with a list of health care providers that accept the discount card until after you have purchased the plan.

• High-pressure marketing tactics, urging that “you must act now” or “this is a one-time offer.”

• Advising that you drop your existing health insurance.

Long cautioned to beware of salespeople and advertisements that use words like “co-payments, premiums and health plans” to deceive consumers into thinking that a discount plan is insurance. Avoid salespeople or discount card companies that insist on debit or credit card information, and who may pressure you to make a quick decision. Long advised consumers to ask the salesperson or company if the product is an insurance plan or a discount plan. Another precaution before signing up for such a plan is to contact the North Carolina Department of Insurance (toll free, 1-800-546-5664), Attorney General and Better Business Bureau to see if there have been complaints against the company.

As health insurance premiums increase, many North Carolinians are searching for more affordable health insurance. This has led to a substantial increase in discount health plans being marketed in the state.

“Buyers beware!” says Long. “Because discount cards are not insurance, fewer consumer protections exist for purchasers of those products. If it sounds too good to be true, it probably is.”

Topics North Carolina