State and federal regulators are launching a crackdown against what they call phony health insurance companies that allegedly are scamming consumers. Like what you see? Click here to sign up for Insurance Networking News weekly newsletter to get the latest on breaking industry news, carrier technology implementations and developing business and technology trends. The Federal Trade Commission (FTC) announced in New York yesterday that it was bringing lawsuits against three companies that sell the questionable health discount plans. Last year, Minnesota Attorney General Lori Swanson brought a lawsuit against Consumer Health Benefits Association of Florida, one of the three companies, charging that the company pressured Minnesotans over the phone into buying a low-cost health insurance plan that wasn’t true insurance coverage.Swanson filed the lawsuit in September 2009. Last month the state 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, according to the St. Paul Pioneer Press.”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 is focusing on companies that target 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.While the FTC 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, the FTC reports.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, reports the St. Paul Pioneer Press. The company also must pay $250,000 in restitution and penalties. A lawsuit is still pending against Association Healthcare Management, said the report.
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