Discount health plans that provide few or no discounts, overstate benefits and send patients to phantom networks of physicians are illegal and should not be allowed to operate in this state, the California Medical Association testified today at a public hearing held by the state Department of Managed Health Care (DMHC).

DMHC has proposed regulations for discount health plans that would legitimize a product the California attorney general has already determined to be illegal. CMA encouraged DMHC to scrap the regulations and instead prohibit the discount plans from operating in California.

"So-called 'discount health plans' are a ruse that deceive patients, create headaches for doctors and ultimately undermine the health care system," said Paul Phinney, M.D., chair of CMA's Board of Trustees. "The state is doing all patients a disservice by proposing these regulations and making them believe discount plans can substitute for real insurance coverage."

Discount health plans typically charge consumers a monthly or annual fee in exchange for a list of participating providers whose services will be delivered at a lower price, but often the providers are unaware, and not part, of such an agreement. Discount plans do not arrange for health care services but merely "discounts," place the entire cost on the patient and assume no risk.

In California, with high unemployment and a growing number of uninsured, the discount plans are proving popular and have an estimated 6 million customers, the Los Angeles Times reported earlier this year.

Since 1999, five different bills have been introduced to grant DMHC or other agencies authority to regulate discount plans, but none have passed the state Legislature. Without getting authority, DMHC is overstepping its boundaries and blatantly attempting to usurp the Legislature's role, which violates the Administrative Procedure Act. Thus, the proposed discount regulation could easily be challenged and struck down by a court.

DMHC has shunned bare bones health policies in the past. But with the proposed regulations for discount plans, the agency appears to be reversing course and moving to legitimize products that offer little or no benefit. Most discount plans give consumers a list of physicians providing discounts that are generally illusory.

According to Cindy Ehnes, director of the DMHC, the agency has received 1,000 complaints about discount health plans since 2004.

Source:
California Medical Association