Madigan: Consumers buy into health plan they thought was medical insurance

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CHICAGO—After receiving complaints from consumers in Illinois and other states, Attorney General Lisa Madigan filed suit against two companies for alleged deceptive marketing and sales tactics used to entice consumers into buying a health plan they believed was actual health insurance.

Madigan’s lawsuit alleges that despite their marketing claims, National Benefits Consultants LLC, a Florida company, and Consumer Health Benefit Association (CHBA), a Missouri not-for-profit corporation, only sell discount health plans—offering discounts that often are not even accepted by providers. The companies market the plans at and through unsolicited faxes and newspaper advertising.

Through alleged marketing and advertising claims such as “Save on Healthcare & Prescription Drugs. Everyone Accepted!”, “Access to one of the largest PPOs in the country, Beech Street” and “We can have you approved for a medical plan regardless of pre-existing conditions,” consumers are led to believe they are purchasing a health insurance plan, not just a discount card, according to Madigan’s suit.

Madigan also alleges the companies require consumers to provide their checking account or credit card information before they will send consumers information about the discount health plan. The consumers’ accounts are then charged an enrollment fee ranging from $109.90 to $199.95, and a monthly fee ranging from $109.90 to $199.95. Callers are told their enrollment fee is refundable within 15 days.

Consumers told Madigan’s office that when they contacted CHBA after they received written materials and realized they had not purchased a traditional insurance policy, they were allegedly told by customer representatives that their enrollment fee was non-refundable, even if they requested a refund within the 15-day purchase window.

Other consumers complained that when they tried to use the alleged discounted services provided by health care providers listed as plan participants, providers often had no knowledge of their listing and would not honor the discount.

“Unfortunately, all consumers need to be very careful when purchasing health plans and must research the promises that telemarketers and advertisements make,” Madigan said. “With so many Illinoisans lacking health insurance, the last thing they need is to spend their hard-earned dollars on a discount plan that very often is worthless.”

Madigan’s complaint alleges that National Benefits Consultants and Consumer Health Benefit Association (CHBA) have violated the Illinois Consumer Fraud and Deceptive Business Practices Act. According to Madigan’s suit, the companies use the Internet and a toll-free number to conduct business from a Coconut Creek, Fla., address and are not registered with the Illinois Secretary of State to transact business in Illinois. In addition, the companies allegedly have marketed the CHBA discount health plan to consumers in Illinois since 2003, but are not registered with the Illinois Department of Insurance as a Preferred Provider Administrator (PPA) as required by law.

Madigan’s suit asks the court to prohibit the companies from marketing and selling discount health plans in Illinois, to declare that all contracts are rescinded, and require payment of full restitution to consumers, a civil penalty of $50,000 for violating the Consumer Fraud Act and additional penalties of $50,000 per violation committed with the intent to defraud. The suit, filed in Cook County Circuit Court, also seeks a civil penalty of $10,000 per violation committed against a person aged 65 and older.

Assistant Attorney General Ryan Tyrrell is handling the case for Madigan’s Consumer Protection Division.

From the Jan. 18-24, 2006, issue

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