Medical Discount Plans Rarely Offer Great Deals

Struggling to find affordable health insurance? As tempting as low-priced medical discount plans may sound, don't be fooled into thinking they're a viable alternative.

Medical discount plans are targeted at small businesses and individuals without health insurance. The programs function as a buyer's club for health-care services and are not licensed.

How do they work? Patients pay an enrollment fee of approximately $125 and then monthly fees around $200 a month (for a single person looking for coverage of all major medical expenses). This gives them access to a list of medical providers who offer discounts to the plan's members. The discount companies often promise patients reductions of up to 60% off everything from root canals to appointments with a primary-care physicians. Even emergency room visits can be included. The idea is that if you must pay out of pocket for your health care, these plans will get you sizable discounts to significantly reduce your costs.

On the surface, these plans sound like a god-send for folks without insurance. But they're often riddled with problems, says Kathleen Stoll, Director of Health Policy at nonprofit Families USA. Her biggest complaint is that they're often marketed as "health plans," which confuses consumers into thinking they're buying traditional health insurance with comprehensive medical coverage. Even the companies that print disclaimers on their web sites stating that they aren't selling insurance can be confusing since the list of services included with membership sound so extensive.

Worse, patients may not even get the limited care they think they're buying, says Cameron Lewis, director of consumer education with the Colorado Division of Insurance. That's because the discounts are often grossly exaggerated and the provider lists are outdated. It's not uncommon for a patient to call a participating physician or dentist and discover he no longer accepts the discount plan, Lewis warns.

Some provider lists may not be credible at all. In 2006 the Montana State Auditor charged medical discount card company AmeriPlan USA with selling memberships to state residents even though it didn't have contracts with the doctors on its provider list. (AmeriPlan didn't return phone calls for comment.)

Although "hospitalization" or "urgent care" is enticingly listed as a covered service, these discount plans should not be confused with catastrophic insurance that covers major illnesses and accidents. The plans tend to have very small caps on how much they'll pay for an emergency room visit, says Kevin Flynn, president of HealthCare Advocates, a Philadelphia-based firm that helps consumers get their health-care bills paid. And if the patient is admitted to the hospital for an extended stay, there's often no coverage at all, leaving consumers financially vulnerable for very large bills. A car accident or stroke, for example, could easily cost a patient $20,000 to $40,000 in hospital fees, he says.

Finally, at their worst, some medical discount plans are simply a front for identity theft, warns Chuck Bell, programs director for Consumers Union, publisher of Consumer Reports. The come-ons arrive over fax or are found online. Once a consumer speaks with a salesperson, he is asked for personal information, including a Social Security number or bank account number. Indeed, earlier this year at least a dozen states, including Colorado and Texas, issued lawsuits against medical discount plans for this sort of fraudulent activity.

For general medical needs, if at all possible, try to purchase some type of health insurance, advises Colorado Division of Insurance's Lewis. The lowest premiums are found on high-deductible plans. While they won't immediately reimburse patients for doctor appointments, they do offer catastrophic coverage should something go horribly wrong with one's health. (Click here for advice on how to buy private insurance.)

For a simple office visit, try negotiating directly with the provider or their office manager. Many medical practitioners today are willing to extend discounts to uninsured patients who offer to pay their bill at the time of service, says HealthCare Advocates' Flynn. A typical reduction could easily equal 20% to 40% of the original cost. (Watch our video for more tips on negotiating a medical bill.)

Finally, if you do opt to go with a discount plan, be wary of which one you choose. Before signing up, make sure to get a policy in writing and call the doctors on the list to verify that they accept the discount plan. And while you have the office on the phone, ask if you could get the same or larger discount on your own. If you can, you probably don’t need to sign up for that discount plan after all.