CA continues crackdown on health card fraud

February 22, 2010 12:00:00 AM PST
The State of California is moving ahead with plans to crack down on fraudulent discount health card companies that have prompted 1,000 complaints to the Department of Managed Health Care.

The department is pursuing new regulations that would include strict licensing requirements for companies that sell discount health cards in California.

"Many Californians are losing their health coverage and are looking for a way to afford medical care, such as discount health cards," said Director of the DMHC Cindy Ehnes. "Consumers must have assurance that discounts are real and that the cards will be accepted within the medical community."

Discount health cards are often marketed online, or via direct mail, or phone solicitation. For an initial fee and monthly payment, the enrollee is entitled to discounted services at approved providers. The ads often target those whose current insurance does not cover certain services like dental or chiropractic, and people who have no health insurance at all.

Currently, there are six million Californians enrolled in such programs. Of the 1,000 consumers who have contacted the state, most report they were led to believe they were purchasing health insurance coverage when in fact they were not.

The state has ordered 18 companies to cease and desist operating in California, pending an investigation.

Allen Erenbaum is a spokesman for the Consumer Health Alliance, a national association of companies that sell discount cards around the country. He believes the proposed California regulations are overly stringent and expensive for legitimate companies.

"There's fraud in every industry," Erenbaum said. "We'd like to shut them down too, but we think that can be accomplished with reasonable regulation."