FHP Sales Tactics to Seniors Probed : Health: Federal regulators are examining claims that field agents selling the company’s senior health plan used questionable methods and made misleading claims. The HMO is changing some of its marketing policies.


Dan Butler’s mother-in-law is 85, but she will often tell you that she is 63.

Her failing memory has erased the recollection of an FHP sales representative who came to her home 15 months ago and signed her up as a member of the company’s senior health plan. Her family first learned that she was signed up for FHP when she needed treatment for a broken finger. The Butlers took her to an FHP member hospital, but the company did not consider the broken finger to be an emergency. Now the Butlers are stuck with a $500 ambulance and emergency room bill that the health maintenance organization said it will not cover.

For the record:

12:00 a.m. Aug. 29, 1991 For the Record
Los Angeles Times Thursday August 29, 1991 Orange County Edition Business Part D Page 2 Column 6 Financial Desk 2 inches; 36 words Type of Material: Correction
Health Care--A list of Medicare substitute health plans in Southern California that appeared in the Wednesday Business section omitted Scan Health Plan of Long Beach, which began marketing its program in March, 1985, and had 2,988 members as of July 1, 1991.

What’s worse, Butler said he believes the FHP salesperson forged his mother-in-law’s signature, because her name is misspelled. But he said he can’t prove it.


“She is 85 years old. She is not competent, that’s why my wife has power of attorney,” Butler said. “It’s amazing how easy (seniors) are to dupe.”

FHP is undergoing a federal review because of complaints like Butler’s. Routine reviews are conducted every two years, and this review is in the normal sequence for FHP. But this time, the government put FHP on notice that it had received too many complaints and has temporarily blocked the company from marketing in new territories. Regulators are expected to approve changes to FHP’s marketing program this week and said they would release a summary of findings to the public shortly afterward.

The FHP senior plan is one of a growing number of substitute Medicare programs offered by HMOs around the country. The arrangement is seemingly beneficial for everyone: the government saves an average of 5% in medical costs per Medicare patient, the HMO receives an average $350 a month from Medicare for each senior who signs up, and members save an average of $100 a month because an HMO generally provides discounts on prescriptions and has lower-cost deductibles on visits to physicians and hospital stays.

FHP’s Senior Plan is the second-largest of these Medicare substitution plans in the country--it recently reported a membership of 208,000, a number that grew by almost 23% in the last year. The company says it has so many members because its patients are happy with their care and with the money they save.

However, the plan’s benefits are not at issue. The complaints center on how the plan is sold.

Seniors, doctors and a few of the company’s salespeople themselves say FHP does not fully explain its program to seniors. For example, seniors often are not aware that signing up may mean they can no longer visit the doctors they have seen for years. Some seniors have been told that they are just signing an acknowledgement that the sales person visited, when the paperwork is actually an application. Also, seniors and their families say FHP is slow to remove people from the list of members once they request it.

The government review has left critics feeling vindicated, but others say it will not affect FHP’s fortunes at all.

“The memberships are not growing because FHP is capturing senior citizens at gunpoint,” said stock analyst Kenneth Abramowitz of Sanford C. Bernstein, an investment research and management firm in New York City. “Membership is growing because (FHP) is essentially offering a product that’s a gift. There are low co-payments, low deductibles and no premium. It saves the typical senior citizen $100 a month.”

Still, there is dissent. Some FHP sales agents, who asked not be identified, have voiced their complaints to the Los Angeles Times, and said they also spoke with federal regulators from the Health Care Financing Administration, the agency that administers Medicare.

Among their concerns are that the company’s sales quotas are too high. Agents must sell nine memberships a week or risk reprimand. And the sales commission structure is such that, to move up into a higher pay bracket, agents must sell 12 to 15 memberships each week, depending on their sales area.

Two salespeople from separate FHP offices confirmed that agents have been known to resort to tactics that are not approved by the company to meet the quotas:

* To get seniors to sign, some salespeople do not explain clearly that the prescription reimbursement feature of the plan may apply only if the patient is willing to accept a generic substitute.

* Salespeople show seniors a list of FHP-approved doctors that may include their current specialists. But some salespeople do not fully explain that the senior’s primary physician may choose to refer him or her to another specialist.

* Although the law prohibits FHP agents from making sales door-to-door and requires them to call first and make an appointment, some agents set up an appointment with one person in a neighborhood and then approaching other seniors they see out around their homes. Salespeople call these “drive-by” sales.

* A senior has three days to change his or her mind about joining FHP before the membership application becomes official. Some salespeople ignore requests to dis-enroll during this three-day period, because a sale counts toward an agent’s quota only after three days.

FHP says such actions are grounds for immediate dismissal. In fact, the company has changed some of its procedures since the federal regulators visited in mid-July. FHP now calls all new members within three days after they have signed up, to make sure they understand the program.

Also, FHP has taken the responsibility for filing dis-enrollment requests out of the hands of its salespeople. And, at least for now, it has suspended its practice of reprimanding agents who do not sell at least nine memberships a week.

Both FHP and its analysts believe the problems the company has had are the work of a few errant salespeople.

“With some exceptions--problems they’ve had with a few marketing people--they’re doing a good job,” said Rae Alperstein, health care services analyst with Kemper Securities Group Inc. in Los Angeles.

And the federal agency that regulates these plans is itself smarting from an investigation late last year that showed Louisville, Ky.-based Humana Medical Plan had unreasonable delays in paying patient bills and in handling members’ appeals of decisions to deny them coverage.

“Humana got away from (federal regulators) and I think they’re being overly cautious with FHP,” said Peter Costa, a health care analyst with Tucker, Anthony, a brokerage based in Boston. “HCFA is flexing its muscles.”

Nevertheless, a group of three elderly women in the San Fernando Valley has filed suit against FHP through Bet Tzedick Legal Services, a public interest law firm. The suit--filed June 13 in Van Nuys Superior Court--alleges that door-to-door salespersons for FHP claimed to represent MediCal and Medicare and said that the women could continue to be cared for by their longtime doctors if they joined the FHP plan.

Joseph Markowitz, one of three attorneys prosecuting the case, said the suit is still in the discovery process.

The federal agency’s review began two weeks after the suit was filed by the three women. A senior Medicare official, who asked that his name not be used because he is not an official spokesman for the agency, said the suit was one thing that prompted the review. Another was that clients are dropping out of FHP’s Senior Plan at a higher rate than from other HMOs in the area, the official said.

And complaints go further back. A 1989 letter-writing campaign by a group of private doctors, Physicians Who Care, urged FHP to clearly identify itself as an HMO when soliciting seniors. A mailing the company had done to Medicare recipients was headed “Medicare Benefits Information” from “FHP’s Senior Plan,” but did not make clear that the two are separate health plans. FHP began labeling its literature more clearly after receiving the cards from Physicians Who Care, said the group’s president, Dr. Ronald Bronow, a Los Angeles dermatologist.

“It’s against the law, and it’s immoral,” Bronow said. “As consumers, patients have a right to know they’re joining an HMO.”

FHP attributes the volume of complaints against it to its being the largest HMO on the West Coast that is authorized to sell replacement Medicare plans. About one-quarter of FHP’s business--about $16 million in revenue a month--is with former Medicare recipients. It sells the Senior Plan in greater Los Angeles, Arizona and New Mexico. It also provides health services not related to Medicare to 3,500 employers in California, Utah, Arizona, New Mexico and Guam.

FHP’s two biggest competitors do not sell their senior health plans by telephoning eligible people the way FHP does. Most of Kaiser Permanente’s senior Health Pledge members converted their Kaiser employee health plans when they retired, said a Kaiser spokeswoman, Amy Baker.

PacifiCare markets its Secure Horizons senior health plan by advertising and waiting for seniors to call them, said Michelle Lawrence, a company spokesman.

Pat Vitacolonna, executive vice president and chief operating officer of FHP, said he sees the government review in a positive light.

“I’m not worried about what the salespeople say to regulators,” he said. “We want to be very open. Anything they say will help us improve the program.”

Leading Health Providers for Seniors These health-care providers are approved by the government to offer services to Medicare patients in Southern California. Enrollment figures are for Southern California only, as of July 3, 1991. The dates indicate when the companies began offering Medicare substitution plans. FHP Inc.: April, 1985: 155,834 Kaiser Permanente / Health Pledge: Sept., 1987: 149,991 PacifiCare / Secure Horizons: Sept., 1985: 121,934 Partners Health Plan (which was renamed Aetna Health Plans): Aug., 1986: 29,524 Watts Health Foundation / United Health Plan: April, 1985: 10,783 Inter Valley Health Plan: June, 1986: 10,251 CIGNA Healthplans / Ross-Loos Health Plan: Jan., 1987: 13,864 CareAmerica Health Plans: Nov., 1990: 2,322 Source: San Francisco regional office of the federal Health Care Financing Administration