By Susan Heavey
WASHINGTON (Reuters) - U.S. regulators are cracking down on the growing number of companies that fraudulently sell so-called medical discount plans by telling consumers they work like health insurance and cover medical costs.
The Federal Trade Commission said on Wednesday it is working with 24 states to crack down on sellers of medical discount plans that market them as health insurance that covers doctors, hospitals and other services.
Such scams have increased in the wake of the healthcare reform law passed in March, said David Vladeck, director of the FTC's Bureau of Consumer Protection. The law aims to expand coverage to tens of millions of uninsured and requires people to have health coverage starting in 2014.
"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," Vladeck told reporters in a conference call. "They're going to try to capitalize on uncertainty."
The Obama administration is trying to prevent companies from taking advantage of consumers in the wake of the health reform passage, including warning traditional insurers not to use the law as an opportunity to push through big rate increases. Such companies include WellPoint Inc, Aetna Inc and UnitedHealth Group Inc, among others.
The healthcare overhaul is expected to be a big campaign issue during the November midterm elections.
The FTC along with several state attorneys general have filed lawsuits against companies that they say mislead consumers by selling medical discount plans that offer some savings but marketing them as insurance accepted by doctors, hospitals and others.
"Health discount plans are not insurance. They don't pay your medical bills," said Minnesota Attorney General Lori Swanson, who has filed three lawsuits. She added that continued job losses are fueling the scams since most Americans who have insurance get it through their employer.
The companies targeted by the FTC and states are mostly privately owned. They include Health Care One, Consumer Health Benefits Association, and United States Benefits.
So far, 54 lawsuits and other civil enforcement actions have been taken by the FTC and the states, officials said.
New York's insurance superintendent, James Wrynn, said some of the discount plans do offer some limited payments for some healthcare expenses such as medical tests or short hospital stays, "but when you find out the extent of the coverage, there is for all intents and purposes, no coverage."
(Reporting by Susan Heavey; Editing by Steve Orlofsky)