A proposed class action has been filed against a number of purported health insurance companies two consumers allege have tricked thousands of unwitting Americans into buying sham health insurance that provides “little to no value.”
The lawsuit alleges the defendants are behind a bait-and-switch scheme that’s utilized an array of websites advertising “comprehensive coverage” to defraud consumers into purchasing limited benefit plans and medical discount memberships.
With the help of “deceptive advertising, material misstatements, and critical omissions,” the “convoluted web of companies” listed below have been able to sell a product represented as insurance that is often worth less than what consumers pay, according to the suit, alleging the defendants offer purported policies that “in reality, do not exist”:
Health Enrollment Group;
Administrative Concepts, Inc.;
Axis (doing business as Axis Insurance Company);
Axis Specialty U.S. Services, Inc.;
Alliance for Consumers USA;
Health Plan Intermediaries Holdings, LLC;
Health Insurance Innovations Holdings, Inc.; and
First Health Group, Corp.
Although the defendants claim to offer low-cost, comprehensive Preferred Provider Organization (PPO) insurance coverage that meets Affordable Care Act requirements, what customers actually receive in exchange for thousands of dollars in premium payments is “essentially worthless” given they’re covered for only “a fraction of most health care costs,” the case alleges.
Instead of a comprehensive PPO plan that covers preexisting medical conditions, prescription drug medications, primary and specialty care treatment, inpatient and emergency hospital care, surgical procedures, and medical and laboratory testing, consumers who do business with the defendants are merely enrolled in limited benefit plans—also called limited benefit indemnity plans or hospital indemnity plans—and medical discount and wellness program memberships, the lawsuit says.
According to the case, the issue is that limited benefit plans are a far cry from the comprehensive coverage that consumers reasonably believe they’ll receive from the defendants. In contrast to a PPO plan, a limited benefit plan offers coverage capped at a specific amount for a specific service, treatment, condition, or disease, the complaint says. Importantly, when a consumer enrolls in a limited benefit plan, the purported insurer assumes “no risk whatsoever” given the premiums paid often exceed the maximum amount of coverage available under the plan.
Overall, the corporate defendants—despite most, if not all, holding no license to sell insurance in California— represent themselves as health insurance brokers, underwriters, a claims administrator, holding companies, and a PPO network provider operating as a common enterprise when all they can offer unwitting consumers are essentially worthless policies, the plaintiffs allege.
“In short,” the complaint reads, “Defendants’ claims and omissions of material fact are likely to and did deceive consumers, like Plaintiffs and the putative class members, into paying ‘premiums’ (sometimes for years on end) for what they believe is health insurance coverage that they will never receive when they need it—and which is illusory when they use it.”
As the lawsuit tells it, potential customers are often directed to the defendants through “misleading” lead generation websites advertising comprehensive coverage. Thereafter, the consumers are connected with the companies’ trained sales representatives by phone, the suit explains. According to a former HEG employee quoted in the complaint, sales representatives use scripted speeches to “try to scam people into buying sub-par health insurance” by way of false coverage promises and misleading insurance buzz words.
After a consumer is promised comprehensive health insurance that covers preexisting conditions, they are told to disregard any contradictory statements made during the following “verification process,” the case says. As part of this so-called verification, consumers allegedly agree that their insurance will be governed by the yet-to-be-provided plan documents rather than the sales pitch. According to the complaint, a consumer is not provided with necessary details until after they’ve been signed up, and have no reason to believe they’ve been duped until it’s too late:
“They are not provided the documentation to confirm such statements until after the process is completed, if at all, and thus would have no reason to believe that the paperwork will contradict everything they have been told in order to get them to enter into the transaction.”
Further, consumers are additionally misled by the insurance card they receive in the mail in which the defendants reference “Preferred Provider (PPO) Network Access” despite knowing they have not provided “any sort of PPO plan,” the case says.
“Once consumers realize they have been cheated, it is too late,” the suit relays.
The end result of the defendants’ scheme, according to the lawsuit, is that thousands of consumers, including the two plaintiffs, have incurred “substantial medical expenses” after mistakenly believing the health insurance they purchased from the defendants would cover healthcare costs.
The plaintiffs, a married couple who bought what they believed to be a comprehensive insurance policy from the defendants, say their insurance covered only $1,500 for the husband’s back surgery, leaving the consumers responsible for $194,366.73. By this time, the couple had paid about $4,500 in “premiums” to the defendants, per the complaint.
Citing a slew of online complaints, the lawsuit claims the plaintiffs’ experience is not an isolated occurrence but reflects the experiences of thousands of others who were allegedly promised comprehensive health coverage and received a product that is “virtually worthless.”
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