“If a person walks into a doctor's office without health insurance, they will pay more for their care than someone with insurance. That's because the insurance companies are big and powerful and can negotiate lower rates. If I ask for that rate for myself, I'd get laughed out of there.
So why don't all of the uninsured people band together into some sort of membership organization? Kind of like how AAA or AARP can negotiate lower rates for hotels. Neither is in the hotel business, but they have enough clout to get discounts.
Would this organization, which is not in the insurance business, be able to negotiate rates for its members? (The members could, of course, go somewhere else if an office refuses to negotiate. You would end up with "in club" and "out of club" providers.) Would this violate the contract doctors sign with insurer networks?
Of course, this would be a ridiculously huge undertaking. But is it theoretically possible?
So asked one of my loyal (?) readers. Actually, what he proposed is not new: there are many "provider discount plans" on the market (e.g. CareEntree, etc) which purport to accomplish that stated goal.
For folks who are truly uninsurable (and they represent but a very small fraction of those who are uninsured), these plans can be a big help, but they are not without drawbacks.
For example, such plans usually require the member to pay the entire cost either upfront or within a very short timeframe (10-30 days, max). For a relatively inexpensive procedure (setting a broken finger, for example) this would be no problem. But for a substantial claim (surgery, MRI, etc) how many folks have thousands of dollars in ready cash?
Another problem with such plans is that they are often sold by unscrupulous folks who gloss over the fact that it is NOT insurance, and so the consumer unwittingly believes that he is insured when, in fact, he is not.
Finally, in looking at such plans myself (in the event that I wanted to market one), I've noticed a large discrepancy in prices; some plans cost hundreds of dollars a year for what is, essentially, a modest service.
The ostensible point of these plans is to encourage folks to seek medical attention, and in some way soften the financial hardship of doing so. While admirable in theory, like so many such endeavors this one is fraught with peril.
As mentioned, such plans are often wrongly sold as alternatives to insurance, or even as insurance products (which they are not). This is dangerous because it may give the purchaser a false sense of security.
And I’m not alone in my concern. According to my co-blogger, “(t)he Illinois Attorney General has sued an Arlington company accused of marketing health care discount cards that misled consumers into thinking they were getting insurance cards.
Illinois Attorney General Lisa Madigan's suit charges the International Association of Benefits, which has operated under several names including IAB, with violations of the Illinois Consumer Fraud and Deceptive Business Practices Act.
And IAB is facing similar charges in Texas, where the Lone Star State's "Attorney General Greg Abbott...obtained a court order correcting the fraudulent business practices of International Association of Benefits (IAB) of Richardson, which falsely promised consumers that its health care “discount cards” could reap significant savings.”
The problem is, some folks are so concerned about the cost of health insurance that they fall prey to such unscrupulous practices. While we all sympathize with their dilemna, it’s also important to remember that sometimes a deal is too good to be true.
Henry Stern, LUTCF is an independent insurance agent in Dayton, OH. A licensed Continuing Education instructor for Ohio and Kentucky, he has well over 20 years of experience in “the biz.” He blogs every day (or so it seems) at InsureBlog.