With more than a million Illinoisans reportedly lacking health care insurance, Attorney General Lisa Madigan has filed suit against a Texas company for allegedly marketing health care discount cards that misled consumers into believing they were buying health insurance instead of mere discounted fees on health care services – discounts often not even accepted by providers.
Madigan’s lawsuit comes at the same time that she is working to reform this industry and protect consumers through legislation designed to end deception by companies falsely parading as actual health insurance providers. The bipartisan legislation, House Bill 1525, currently is pending in the House and is sponsored by Reps. Linda Chapa LaVia (D-Aurora), Marlow Colvin (D-Chicago), Michael McAuliffe (R-Chicago), Jack McGuire (D-Joliet) and Elaine Nekritz (D-Des Plaines).
Madigan said her office has received more than 120 complaints from Illinois consumers since January 2002 about companies that masquerade as health care. The number of complaints doubled from 2003 to 2004. The discount health care card companies aggressively market their products through radio ads, blast faxes and circulars.
“If you see or hear ads that trumpet such terms as ‘Affordable Healthcare,’ ‘Health care for the entire family for only $89.95 a month’ or ‘All Medical Conditions Accepted,’ a reasonable person will probably assume this ad is for a health care plan,” Madigan said. “Illinois consumers are being deceived into thinking that they are finally able to achieve health care security when in fact all they may receive is a few dollars off of a service, and that’s only if a provider agrees to accept their health care discount card. What these consumers are truly gaining access to is deception, disappointment, and very often, massive debt.”
Madigan’s complaint charges a Washington, D.C.-based non-profit organization, International Association of Benefits, formerly International Association of Businesses, and a Texas corporation, HealthCorp International Inc., all doing business as IAB, 701 Highlander Dr., Arlington, Texas, with violations of the Illinois Consumer Fraud and Deceptive Business Practices Act. The company reportedly markets its health care-related cash discount cards at www.iabbenefits.com.
According to one of the nine complaints lodged with Madigan’s Health Care Bureau against IAB, a consumer reported to Madigan’s office that he signed up with IAB after hearing a radio ad allegedly stating that IAB was an insurance company.
The man alleges the company quoted the savings he would realize when pre-certifying a planned hospitalization. When he submitted his hospital bills to IAB, the consumer allegedly discovered it was merely a health care discount card. While the Attorney General’s office was able to get his premiums refunded, the south suburban consumer now owes more than $7,000 to a south suburban Chicago hospital.
Another consumer reportedly received a flyer stating IAB’s coverage was a nationwide PPO and would provide reimbursements for office visits and access to PPO hospitals, doctors, dentists and other medical services. The consumer paid a $100 enrollment fee and a monthly premium of $89.95 for the services, and allegedly was told he could cancel the plan within 30 days of purchase. However, he and other consumers reported that IAB refused to refund their money once the consumers realized that IAB’s product was not insurance. In one case, IAB finally returned the payment only after Madigan’s Health Care Bureau reportedly intervened.
Madigan’s suit also alleges IAB misled consumers by fraudulently displaying a Better Business Bureau seal on its Web site and listing health care providers as participating in its discount program, when in fact, these providers would not honor the discount. Additionally, IAB was not legally registered with the Illinois Secretary of State or the Illinois Department of Financial and Professional Regulation’s Division of Insurance.
Madigan’s suit seeks to permanently prohibit the company from doing business in Illinois. The suit also seeks to recover restitution for consumers, and asks the court to impose a civil penalty of $50,000 and additional penalties of $50,000 per violation committed with the intent to defraud. Madigan’s suit also seeks an additional civil penalty of $10,000 per violation committed against a person aged 65 and older.
Following the investigations of this case and other similar complaints lodged with the Office of the Attorney General, Madigan proposed legislation to protect consumers from unscrupulous health care discount card providers.
Under the legislation, SB 1525, discount health plans would be prohibited from using any language in their advertisements that makes it appear as if they provide actual health insurance and would be subject to additional registration and oversight by the Department of Insurance.
Additionally, under this legislation, the plans would be required to take steps to ensure that consumers are aware they are not purchasing actual health care insurance and understand the scope of the products.
Specifically, the bill requires the health discount card companies to disclose the 25 closest health care providers for each advertised service; keep a current list of providers accessible through a toll-free number and Web site; provide consumers with an itemized list of the cost of any additional products sold; follow Illinois retail advertising regulations; and maintain a fiduciary account or post a bond of indemnity of not less than $50,000 to protect card holders.
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