Bogus Health Insurers Targeted, Minnesota AG is Part of Federal Crackdown

State and federal law enforcement groups are launching a crackdown against what they call fake health insurance companies that allegedly scam consumers searching for coverage.

Minnesota Attorney General Lori Swanson was in New York on Wednesday for the announcement, in which the Federal Trade Commission said it was bringing lawsuits against three companies that sell the questionable health discount plans.

Last year, Swanson brought a lawsuit against one of the three companies -- Consumer Health Benefits Association of Florida -- charging the firm with pressuring Minnesotans over the phone into buying a low-cost health plan that wasn't really insurance and offered few benefits.

Swanson filed the lawsuit in September. The state last month won a consent judgment barring the company and its principals from selling health discount plans in Minnesota, the attorney general's office said Wednesday. The company must pay $500,000 in restitution and penalties, according to Swanson's office.

Consumer Health did not return a call seeking comment.

"High health insurance premiums and high unemployment have created a market niche for bogus health insurance companies," Swanson said in a statement.

The state and federal crackdown targets firms that seek out people who are looking for affordable coverage in the face of high premiums. The companies deceptively sell limited discount plans to consumers, prosecutors allege, in part by misleading them into believing

the plans are health insurance or insurance-like products.

The firms generally charge enrollment fees of between $100 and $150, and monthly fees between $100 and $450. The average monthly premium for health policies in 2009, by contrast, was about $400 for individuals and $1,100 for families. The number of Minnesotans without health insurance also has been on the rise.

While the Federal Trade Commission brought lawsuits Wednesday against three companies, officials said there are many more alleged offenders. The trend has prompted attorneys general and insurance commissioners in 24 states to file a total of 54 enforcement actions against such firms, according to the FTC.

In February, for example, Swanson sued two health discount plans in Texas -- Direct Medical Network Solutions Inc. and Association Healthcare Management Inc. -- that were not named in the lawsuits announced Wednesday.

In March, Swanson won a consent judgment against Direct Medical that bars the company and its principals from selling health discount plans in Minnesota, her office said Wednesday. The company also must pay $250,000 in restitution and penalties. A lawsuit is still pending against Association Healthcare Management.