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Regulation of Discount Health Plans
Over the past decade it has become increasingly obvious that large preferred provider networks that negotiate discount payments with doctors and hospitals would play a greater role in the delivery of health care. In the past few years, more consumers have learned that they do not need to be a member of a health insurance plan in order to benefit from pre-negotiated discounts on the cost of medical care. The discount health plan industry was invented by packaging the discounts available through preferred provider organization separately from the health insurance. This unbundling gives consumers the ability to shop for the best health insurance separately from the best medical service providers. As the discount health plan industry grew, so did the potential for fraud and abusive marketing. Consumer protection agencies recognized a need to educate consumers and prevent abuse.
Health discount plans are regulated by state government in most states. The primary intent is to make sure that these benefit plans are not confused with health insurance or marketed in a deceiving way. Ironically, despite the government's intent to show that PPO discount plans are not insurance, the regulation of these plans is handled by state insurance departments. Only New York state has ruled that health discount plans are insurance. Most other states have worked hard to make clear that health discount plans are not insurance. State insurance departments regulate these non-insurance discount health plan products in three ways: 1) controlling use of certain words or phrases, 2) requiring registration of discount plan marketers, and 3) requiring the inclusion of a disclosure statement on public marketing materials.
One well-accepted regulatory trend is to restrict the use of certain words or phrases that sound too much like those used to describe health insurance. Words like "covered", "coverage", "co-pay", "pre-existing conditions", "guaranteed issue", "claim form" are prohibited because they can easily be confused with the same terms used to describe health insurance. In addition, it is illegal to compare discount health plans to health insurance or to suggest that discount plans as an alternative to health insurance. Reputable enrollers always clarify that health insurance and discount plans should always be used together. Some states take this a step further. Nevada, for example, states that marketing materials may not use the terms "PPO", "preferred provider organization" and "enrollment". Ironically, other states like Illinois specifically require use the term "preferred provider" in their registration requirement. This apparent contradiction between state laws causes confusion for marketers with a national audience.
The second emerging trend used by some states to regulate discount health plans is the requirement for those who market PPO discount plans to be registered with the state. This method is effective in controlling many other industries, and may serve to help distinguish between legitimate enrollers and scammers, especially for those plans marketed on the Internet. The Illinois Division of Insurance requires Preferred Provider Program administrators to register before December 31, 2005. Other states that have registration requirements include South Carolina, New Hampshire, South Dakota, Utah, and Montana.
Finally, some states require the prominent use of a consumer disclosure statement. Ehealthdiscountplan.com uses the following disclosure statement: "Please note that this is not health insurance and we do not make payments directly to medical services providers. It is a discount program, and you are obligated to pay for all health care services. You will receive discounts for medical services at certain health care providers who have contracted with the plan. This plan is administered by CAREINGTON International Corporation, 7400 Gaylord Parkway, Frisco, TX 75034. The program and its administrators have no liability for providing or guaranteeing service or the quality of service rendered. Note to Utah residents: this contract is not protected by the Utah Life and Health Guaranty Association."
Next year the National Association of Insurance Commissioners (NAIC) is expected to publish a "model bill" that will help to standardize the regulation of discount health plans from state to state. Once this model bill is published, more states are likely to adopt this as the basis for new laws to regulate discount health plans.
Ehealthdiscountplan.com recognizes the importance of these consumer protection laws. Our intent is to comply with the specific current laws in the separate states pertaining to Preferred Provider Organization discount plans but while lobbying for consistent common sense regulation across state borders. OnlineAdviserTM is an independent service that is not licensed as a life, accident and health insurance agent in any states or the District of Columbia and is not registered as a discount health plan or PPO plan affiliate as defined under this type of regulation. OnlineAdviser service has assisted with questions from more than 30,000 health insurance consumers and more than 1,000 discount health plan consumers over a more than 18 years and has not ever been involved in a consumer complaint. Future regulation may affect our ability to to continue to provide this service. Our intent is to remain independent and unlicensed and to refer questions that require licensing and appointment to an appropriately appointed representative.
Discount health plans may be one of the most effective new tools in the control of our national health care cost crisis, but it is essential that consumers understand them and that marketers do not use.
Be Careful when Purchasing a Health Discount Plan
Beware of Health Discount Plans (pdf)
Consumer Information on Discount Health Plans
Health Discount Cards and Referral Plans
Health Discount Plans are Insurance in New York
Health Discount Plans are Not Insurance
Health Discount Plan Brochure from Colorado (pdf)
Letter from Texas Insurance Department of Discount Health Plans
"OnlineAdviser" is a trademark of Freedom Benefits Association, P.O. Box 102, Narberth PA 19072