How to Spot Insurance Scams

A Costly Mistake

In early July 2004, Korrie Shourds, 32, was nearly nine months pregnant and, although she and her husband were both employed, she didn't have health insurance. Shourds, a daycare operator in eastern Montana, was scheduled to have a c-section, so the couple had been scrimping to save $8,000 for the hospital bill. Then, just a few weeks before the operation was scheduled, a telemarketer from First Choice HealthCare Services, a company based in Tampa, Florida, called. Shourds was told that, thanks to the company's special discount healthcare plan, for a $199 enrollment fee plus $90 a month, she could receive a $5,000 discount off the hospital bills. The salesperson looked up Shourds's hospital and obstetrician and assured her they were part of the company's network of providers. "I felt so lucky," says Shourds.

Still, before signing up, Shourds called her hospital to verify that it accepted the plan. Assured that it did, she put the sign-up payment on her credit card and when she was admitted, she gave the hospital her health-plan card. Imagine her shock when she discovered that the company had not come through and that the hospital was holding her responsible for the full $8,000 bill. "That's when I learned that First Choice wasn't a health-insurance plan at all," says Shourds. "It was a medical discount plan. And it didn't have a single hospital or provider giving discounts in Montana." What about her call to the hospital? That turned out to be a misunderstanding: The discount plan's name was similar to that of a legitimate health-insurance plan that the hospital did accept. "I was pretty upset that the company flat out lied to me on the phone," Shourds says. "First Choice never paid for the c-section, and I had to pay for the amniocentesis, the circumcision, lab fees, and other medical expenses."

Shourds was lucky: She was able to cancel her credit card payment to First Choice and get her money back. Thousands of other consumers have not been so fortunate. They have paid hundreds, even thousands, of dollars to discount health-plan providers for coverage that turned out to be worthless.

Enticing promises are what make these health plans so attractive. For a low monthly fee, they offer discounts (which have already been negotiated) of 10 to 60 percent on bills from participating doctors and hospitals, regardless of your age or preexisting health conditions. They are similar to discount dental, vision, and prescription drug plans, which have been around for years, and by all accounts, usually work as advertised to provide good deals. But while some of these new discount health plans are legitimate, many are fly-by-night operations out to make a quick buck -- at your expense.