State to Set Rules on Health Cards
California on Tuesday joined a rising number of states imposing regulations on healthcare discount cards, a fast-growing product that has generated debate amid allegations of fraud or exaggerated claims.
But consumer advocates and doctors remained unconvinced about the cards’ value even with new regulations.
The California Department of Managed Healthcare, which oversees health plans in the state, announced Tuesday that it would license the cards.
The cards, which offer savings on medical and dental costs, are attractive to people who can’t afford or obtain traditional health insurance. They are held by more than 6 million Californians.
Consumers and state agencies have sued several businesses providing the cards, alleging that they made exaggerated claims about savings or sold worthless cards not recognized by doctors and dentists.
Industry representatives say unscrupulous operators have sullied the business but that legitimate cards offer a valuable service.
“The industry has the same interest as the government of weeding out the bad actors,” said Phil Recht, an attorney for the trade group Consumer Health Alliance. Recht estimated that alliance members offer discounted healthcare to more than 28 million people nationwide.
About 25 states have enacted regulations in recent years in response to growing consumer complaints. In California, officials spent years deciding which agency should have oversight.
Discounts are no substitute for health insurance, Department of Managed Healthcare Director Cindy Ehnes said at a news conference in Sacramento. But “for many uninsured Californians, discount healthcare cards have become a growing alternative to traditional healthcare plans,” she said.
Companies will be required to abide by disclosure rules and prove their claims of discounts, among other things.
Consumer advocates and doctors are not convinced that the cards are such a bargain.
“The fundamental question is, ‘What is the discount?’ ” said Beth Capell, a lobbyist for Health Access California, a consumer group. “There is no sticker price in healthcare, so what is the discount from?”
The cards often offer the same discounted rates that insurers negotiate to pay doctors and hospitals in their networks. The rates are significantly lower than the so-called rack rates, or prices providers charge patients who are not insured.
But because health insurers pay the bulk of healthcare bills in the country, rack rates are seldom charged.
Discount cards are a “new middleman who’s found a way to make money,” said Jack Lewin, chief executive of the California Medical Assn. “Most doctors would be willing to give uninsured people a break anyway.”
By the end of the year, the CMA expects to post a list of member doctors willing to charge the same rates to all patients regardless of whether they are insured, Lewin said.
Card operators say discounts from providers are good, but not all patients have access to them.
Kristen Cole, 39, lost her health and dental coverage when she became a single mother and quit her job six years ago to run a child-care business from her Lancaster home.
She kept the same dentist, however, through Dental Club, a San Diego-based discount card company, the first licensed under the state’s new regulations.
Cole pays $84 a year for the card. She said she would consider a medical card as well.
“Every little bit helps,” she said.
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