HEALTH ONLINE: State Cracks Down on Discount Companies
The California Department of Corporations, which oversees the state's managed health care industry, has ordered 46 unlicensed Internet discount providers to cease operations or face civil penalties -- since they conduct business outside industry regulations, the AP/Sacramento Bee reports. Calling themselves referral plans, most of the companies in question charge monthly or annual fees in exchange for cards that theoretically provide medical, dental and prescription discounts (11/28). According to Department of Corporations Commissioner William Kenefick, 15 of the firms have suspended their California operations while a few others have put disclaimers on their web sites indicating that they no longer serve California residents. Kenefick said, "These plans tend to target the elderly and the uninsured, low-income individuals. Moreover, there are serious questions whether these benefits are real or illusory." In addition, Kenefick contends that many of the services offered by the "referral plans" are no better than those services already available without monthly fees and really amount to pyramid marketing operations. One company, the Arlington, TX-based Care Entree, has contested the state ban. The company offers incentives to those who become "independent marketing representatives," but charges them a $59.95 initial membership fee and a $29.95 annual fee and requires them to become members of the plan -- at $20 per month. The site boasts, "For less than you would pay to take the family out for a great evening you can become a Care Entree independent marketing representative and start to receive these fantastic savings and embark on a lucrative new business." Kenefick said that the number of these companies has increased dramatically in recent months, but had no information on how much money they were bilking from state residents.
Too Little Too Late?
Some health care associations have praised the department's crackdown, contending that the companies practiced unfair competition. Troy Becker, president of the California Association of Dental Plans, said, "It got to the point where many thought the best way to enter the California market was to come in unlicensed." However, others say that the department's action is nothing more that a "bid for survival" as it turns over its managed care authority next year to the newly created Department of Managed Care. Many note that the Corporations Department has a spotty history of enforcement. Los Angeles- based consumer advocate Jamie Court said, "This is a department where there has been no cop on the beat for a very long time. It is a very small gesture" (Tempest, Los Angeles Times, 11/26).