Attorney General Martha Coakley Files Suit Against Companies for Deceptive Sales of Medical Discount Plan
Suit filed as AG considers new consumer protection regulations
"Consumers in this state have enough on their plate when it comes to purchasing health insurance to meet the Massachusetts mandate and should not be overrun with products that purport to be one thing, but are something else entirely," said Attorney General Coakley. "When companies exploit the mandate by passing off a medical discount plan as though it met the standards of minimum creditable coverage, it constitutes an illegal sales practice and will not be tolerated by this office."
The Attorney General's complaint alleges that the defendants used high-pressure sales tactics and targeted sales of their medical discount plan to vulnerable Massachusetts residents with pre-existing conditions who were seeking information about health insurance on the internet. According to the complaint, the defendants misrepresented to Massachusetts residents that they were providing them with health insurance or some form of comprehensive health or medical coverage. The complaint further alleges the defendants used health insurance terms misleading Massachusetts residents to believe that they were purchasing health insurance. Consumers were charged a non-refundable enrollment fee of approximately $119 plus monthly membership fees in similar amounts.
The Attorney General is seeking penalties, restitution for consumers, and a court order permanently prohibiting the defendants from engaging in the deceptive and illegal practices in Massachusetts that are the subject of the lawsuit.
The lawsuit is part of the Attorney General's multi-pronged approach to address the increasing problem of deceptive marketing of medical discount plans. In addition to this lawsuit, Attorney General Coakley's office held a public hearing today on proposed new consumer protection regulations designed to protect Massachusetts residents from unscrupulous marketing practices similar to the defendants' conduct in the litigation. The proposed regulations would require organizations marketing medical discount plans for sale in Massachusetts to fully disclose how the plan works and whether the plan is limited to certain services or products from certain providers. The disclosures must make clear that the discount plan is not insurance and that the consumer will be required to pay for any services or products. In addition, the regulations will require medical discount plans to maintain lists available to consumers of any providers who have agreed to offer the plan's members discounts.
Attorney General Coakley created the Office's Health Care Division upon taking office in 2007 to place a heightened focus on promoting the interests of consumers as Massachusetts undertook its landmark health reform effort. Since its implementation, the division has taken a variety of actions aimed at protecting consumers against unfair and deceptive trade practices by health insurers and medical discount plans.
Consumers looking for tips on how to avoid scams and make smart health plan choices can visit the Attorney General's website and review a joint consumer advisory issued by the Attorney General's Office and the Division of Insurance. The advisory can be viewed here: http://www.mass.gov/Cago/docs/healthcare/health_advisory.pdf .
The litigation is being handled by Assistant Attorney General Emiliano Mazlen, and the proposed consumer protection regulation is being handled by Assistant Attorney General Lois Johnson, both with assistance from Division Chief Thomas O'Brien of Attorney General Coakley's Health Care Division.