Don't get caught up in a discount health scam

As millions of people lose their employer-based health insurance after being laid off, they seek desperately to find affordable health coverage. Unfortunately many people get caught up in discount heath schemes rather than real health insurance coverage.

California is taking the lead on cracking down on these discount health and dental plan frauds with a plan to seek new licensing regulations. Right now in California, consumers have lodged complaints against more than 150 unlicensed discount health and dental plans over the last four years. State regulators want to rein in these plans that officials say frequently overstate benefits, offer little if any savings and promise access to doctors who aren't part of the system.

Not all discount plans are bad. California state officials identified two major health insurers with units in California, for instance, that have not been the subject of any consumer complaints to state regulators. The two -- Vital Savings, a product of Aetna, and OptumHealth Allies, an arm of UnitedHealth Group -- do not offer insurance but provide access to discount services to thousands of members.

So considering a discount plan is not necessarily a bad thing, but be sure you understand the difference. Discount plans are not health insurance. They only offer a discount if you use the physicians or other medical facilities that are part of the plan. One of the biggest problems I've found with these discount cards is that most physicians do not accept the plan and that a list of physicians provided by the plan often is not up to date. If you can't afford health insurance and are considering a discount plan instead, get a list of providers and call them those you may want to use to be sure they recognize and still accept the plan before you sign up.

Basically these discount health plans offer people who pay a monthly fee discounts on physician visits, hospital stays, prescription drugs, dental work, eyecare and other treatment. If they are legitimate you can find valuable money-saving benefits if you're not able to get or cannot afford health insurance. But, be sure you understand they are not health insurance. You will be obligated to pay all medical bills yourself.

Often the scammers lure you with ads that make it sound like they are selling real insurance or they make grossly inflated promises about savings and benefits. Many of these cards can cost you more than they are worth. Since they are not insurance, few states offer consumer protections and most don't require any licensing or healthcare background

If you do have coverage currently, don't cancel it until you've read all the fine print of any new health insurance or discount contract. You actually could end up canceling current health coverage by mistake because you think you found a better deal and end up with no health coverage at all. Often you won't find out until you're stuck with a large medical bill that you must pay out of your own pocket. Or you may find out when you present the discount card at your doctor's office and he gives you the bad news that this discount card is not health insurance.

Even if you find out that the discounts are legitimate, you may find out there are hidden administrative fees and other hidden costs that can eat up your discounts and you're stuck paying more than you thought when reading the glossy brochure. You could find the medical providers and treatments listed were just a come on and don't really exist. Always make a few calls to the promised providers to find out if the discounts are real before you sign up.

The discount card scammers use some common sales pitches:

• "Save up to 60% on health care" -- remember "up to" is an empty promise that might only apply to one provider's discount while all other providers offer discounts of 5% to 20%.
• "Affordable health coverage," which makes people think it's really health insurance, but it's not. You can only tell the difference by reading the fine print.
• "Guaranteed" benefits. Also makes it sound like insurance, but find out what exactly is being guaranteed.
• "Long-term care" discounts, be sure you understand this is not long-term healthcare insurance.

As you read through the fine print, find out the details about the discount offers on the medicine and treatments that you actually need. Also check to see what medical conditions, medicine, treatments and other services are included. Look for clear information about the prices you'll pay and the discounts you'll receive. If the sales person making the pitch seems evasive, ill-informed or reluctant to answer your questions, that's a great sign that it's time to walk away from the deal.

Credit card fraud can also be part of a discount card scam. The scammers will ask for your credit card or checking account number and then use it for identity theft schemes. Don't ever give your information over the phone or on the Internet unless you've fully researched the plan independently and you've made the call to the company. Also, be sure any membership fees are refundable if you choose to cancel and what the process for canceling will be.

Before signing up for any discount plan, call your state insurance department and the Better Business Bureau to see if other consumers have complained about the discount card you are considering. If you do suspect a scam, report what you found to your state insurance department, as well as the Better Business Bureau.

Lita Epstein has written more than 25 books including "Surviving a Layoff: A Week-by-Week Guide to Getting Your Life Back Together" and "Working After Retirement for Dummies."