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Regulation of Preferred Provider Organization (PPO) Discount Health Plans

January 1, 2010

Beware of unregulated health discount plans marketed on the Internet and Social media sites like Twitter. The focus of such marketing is to make these seem like more than they are; specifically that they are a substitute for insurance. Health discount plans are not insurance. Reputable PPO organizations focus on relaying accurate information but some third-party marketers short-cut the process to boost sales.

Several states have recently passed laws and others are considering such laws to regulate the rapid growth of preferred provider discount plans. The intent of these laws is to address the difficult responsibility of regulating to the many independent marketers operating through independent sales pyramids that are generally invisible to the PPO administrator. These laws, overall, have been largely ineffective in preventing consumer scams.

Florida laws have been in effect the longest but were amended in June 2005 to limit the potential liability of PPO marketers and loosening the disclosure requirements. The former requirement for marketers to post a cash security deposit has been changed to allow the use of a surety bond.  The law limits the wording that may be used and requires a notice of cancellation rights.

North Dakota requires disclosures, limits wording and notice of cancellation rights.

Illinois takes the unique position that firms that market discount health plans must register with the state as a Preferred Provider Administrator (PPO). A marketer's parent company can be penalized for being represented by unregistered PPOs.

New Hampshire requires registration of discount prescription drug cards.

Kansas requires registration and s $50,000 surety bond for discount card companies. The card must state that the plan is not insurance and prohibits misleading representations.

South Carolina requires a registration for discount prescription drug cards.

Arkansas requires full refund of all fees including membership fees, enrollment fees and processing fees if the plan is cancelled within 30 days.

South Dakota requires registration and posting of a $20,000 surety bond.

Utah requires registration and payment of a fee.

Montana has disclosure and market conduct requirements for card suppliers but these do not apply to marketers.

Oklahoma has disclosure requirements, requires a surety bond, limits wording and requires cancellation rights.


The two largest marketers and most reputable sponsors of health discount plans are Ehealthdiscountplan.com and Careington. Both companies are compliant with the current regulations and maintain adequate provision for dealing with abuses by independent marketers. MedSave.com will continue to make inquiries to the PPO organizations presented in its listings to make sure that they are aware of and in compliance with the state regulations as they continue to evolve.

 


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