Health insurance is 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%
So 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 cards.
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 (more about that alert in a moment). And if you search Google for discount health plans, one of the first sites you’ll see is an article on InsuranceFraud.org warning about these plans. So we decided to take a closer look at these plans and offer some tips on how to evaluate whether a health discount plan is 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 Back Package to $88 a month for the Premium Package. In contrast, eHealthInsurance.com offers more narrowly tailored discount programs covering just dental and visions 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 website, they provide the following table as an example of member savings:
As far as I know, there is no way to verify this 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 are 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 versus Health Insurance: First, do you need health insurance or a discount plan? While health insurance is too expensive for some, it's worth shopping around first 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 website doesn't provide this information, call or e-mail the company for more details. I did this as a test for two providers, and they both responded within 24 hours with information.
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 cancellation policy, too. As an example, here is the cancellation policy from Qualified Health (as of 2/17/2010):
12. Members may cancel their Qualified Health program at any time upon written notice to the company and return of the ID cards. Cards should be mailed to: Qualified Health Accounting Department, P.O. Box 100820, Brooklyn NY 11210-0820. Program fees on enrollments cancelled within the first 30 days of enrollment date may be eligible for refund if the Qualified Health ID card is returned to the company within five business days prior to the anniversary date of member enrollment. Failure to activate cards does not constitute termination of the service agreement. The $20.00 enrollment fee is non-refundable. Any savings received under the program will reduce the refunded amount.
Investigate the health discount plan provider: Through Internet searches, contacting your state's attorney general and the Better Business Bureau, you should be able to get information on the provider.
Discount Health Plan Providers
Here's a list of companies that provide discount plans. You'll need to do your own research, of course, as I have no experience with any of these companies:
So are discount health plans a scam? It seems that the better question to ask is how valuable they are, and that will vary from persons to person depending on how you’ll use the features each plan offers. 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.