Discount health plans are NOT health insurance
The FTC has issued an alert about such plans. Here are some questions to ask.
Health insurance can be expensive. And if you are shopping for individual health insurance, you know it can be really expensive. Add to that pre-existing conditions, and the price can be outright ridiculous. And that's why the following claims can be really enticing to those looking for health insurance:
- Affordable health care plan.
- Pre-existing conditions? No problem!
- No deductible or co-pays.
- Thousands of providers in our PPO network.
- Discounts up to 60%.
What's the problem with these claims? The problem is they aren't advertising health insurance. Instead, they are promoting what are called discount health plans. If you’ve spent any time researching individual health insurance, you’ve probably come across these plans, sometimes called medical discount plans.
- Bing: Discount health plans
While discounts are always good, many are questioning just how effective these plans are. The concerns have grown to the point that the Federal Trade Commission has issued an alert about these plans, which says: "The FTC and many states have found that although some medical discount plans provide legitimate discounts that benefit their members, many take consumers’ money and offer very little in return." And if you search online for “discount health plans,” one of the sites you’ll see is an article on InsuranceFraud.org warning about these plans.
So we decided to take a closer look and offer some tips on how to evaluate whether a health discount plan is legitimate and right for you.
What is a discount health plan?
As noted above, discount health plans are NOT health insurance. Rather, they claim to offer vision, dental, prescriptions, physical therapy, or other medical care at a significant discount in exchange for a monthly fee. Most providers offer several different plans that generally fall into one of two categories. The first category is limited to a specific type of health service. For example, you can find discount plans that just cover dental care or prescriptions. The second category bundles together discounts across several types of health care.
By way of example, a company called Qualified Health offers a Basic Package and a Premium Package, both of which cover a broad range of services, including dental, vision, hearing, prescriptions, and in the Premium Package, hospital visits. The cost ranges from $19.95 a month for an individual on the Basic Package to $88 a month for the Premium Package. In contrast, eHealthInsurance.com offers more narrowly tailored discount cards covering just dental and vision or dental, vision and prescriptions. The cost is less, as you would expect, ranging from a low of about $7.50 to a high of $15 a month.
But the real question is: How much will these plans actually save you? And that's where things become a bit murky. On the Qualified Health Web site, a table of examples of member savings is provided. As far as I know, there is no way to verify the information. More importantly, the question is not how much others have saved, but how much you will save if you buy into the plan. And that question depends on a number of factors very specific to each individual, including where you live, what doctors and other health care professionals you see, what treatments you'll undertake, and so on.
As a result, there's some homework you should do before buying a discount health plan.
What questions should you ask before buying a plan? Here is a list of things to consider before buying a medical discount plan. Many of these tips come from the FTC alert mentioned above.
Discount plan vs. health insurance. First, do you need health insurance or a discount plan? While health insurance may be too expensive for some, it's worth shopping around to compare prices. On eHealthInsurance.com, you can get health insurance quotes in seconds without providing your name, address, or other personally identifiable information. So it's easy to compare discount plans with health insurance.
Check out the plan's providers. Find out which health care providers in your area accept the discount plan you're considering. If the plan's Web site doesn't provide this information, call or e-mail the company for more details. I did this as a test for two companies, and they both responded within 24 hours.
Contact your health care providers. I think this is the most important step. Contact the health care providers you use and confirm that they participate in the discount plan. If they do, find out exactly how much you'll save. You may even ask if you can get the discount without the plan. Either way, you can't make an informed decision unless you compare how much the plan costs with the actual savings you'll receive.
Read the terms and conditions of the plan. As with any financial product, you need to read the fine print. The FTC suggests taking a hard look at the refund policy, to which I would add the cancelation policy, too.
Investigate the health discount plan provider. Through Internet searches and contacting your state's attorney general and the Better Business Bureau, you should be able to get information on the company.
If you've used a discount health plan before, please leave a comment below telling us whether you thought the plan was worth the money.
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