FTC, States Coordinate Plan To Crack Down on Counterfeit Health Plans

On Wednesday, the Federal Trade Commission and attorneys general in 24 states on launched a "national crackdown" on companies that fraudulently market "medical discount plans" as if they were legitimate health insurance that covers the cost of physician and hospital services, Bloomberg/Minneapolis Star Tribune reports.

Federal and state officials estimated that companies marketed such plans to about 47 million uninsured U.S. residents and that tens of thousands of individuals could have purchased the plans (Wayne, Bloomberg/Minneapolis Star Tribune, 8/11).

Fraud Specifics

Federal and state officials have filed 54 lawsuits and regulatory actions against companies that allegedly sold fraudulent insurance and conducted illegal robocalls and fax blasts (Vesely, Modern Healthcare, 8/11).

Most of the companies named in the lawsuits are privately owned, including:

• Consumer Health Benefits Association;
• Health Care One; and
• United States Benefits (Heavey, Reuters, 8/11).

The three companies were suspected of charging consumers enrollment fees for false health care-related discounts and then prohibiting them from canceling (Modern Healthcare, 8/11).

Health Reform as Instigator

According to FTC officials, the amount of fraudulent activity has increased since President Obama signed the federal health reform law in March, as companies attempt to exploit consumers' uncertainty about the new benefits provided under the overhaul.

David Vladeck -- director of FTC's Bureau of Consumer Protection -- said, "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" (Reuters, 8/11).