ST. PAUL, Minn. -- There's a big difference between solid gold and something covered in gold leaf paint. The same applies to health insurance.
The Minnesota Department of Commerce issued a consumer alert Monday, urging those in the market for health coverage to be aware that limited benefit policies -- also known as mini-med plans -- are not the same as real health insurance.
"It's giving people false hope," Matt Swenson, the agency's communications director, told KARE.
"People often find out when they purchase these plans and actually end up going to the doctor or going to the hospital, that they don't cover much at all, maybe $10 on a cat scan or $50 on a surgery."
In June the State reached a $700,000 settlement with AFLAC, which didn't admit fault but agreed to tighten its marketing approach for such health plans.
In 2010, the Commerce Dept. fined Pennsylvania insurance company NUFIC $100,000 for selling "Essential Health" policies and another discount plan offered by Patriot Health of Florida. NUFIC blamed five "rogue" telemarketing firms for the mini-med policies as regular NUFIC coverage, which they weren't.
"We asked them to clean up their business practices, and cease and desist any activity," Swenson said.
But the best defense for consumers is to avoid plans that aren't what they seem to be.
"It's important for people to know if they're buying one of these plans that it is not a substitute for health insurance," Swenson explained.
"What we've seen in a lot of these circumstances is the people trying to sell these policies in Minnesota are not licensed to sell insurance in the state of Minnesota."
Some of the common phrases used in the pitch for these mini-med plans include real health insurance, guaranteed acceptance, good only for limited open enrollment time and affordable health insurance. He said the limited benefit plans are often marketed as the cheaper alternative to major medical health insurance.
Another red flag, according to Swenson, is any offer that arrives unsolicited through phone calls, faxes or email messages. If the policy requires an "association membership" it's also unlikely to be a real health insurance plan.
"We think that, with the transition to federal health care reform, folks are going to be out there taking advantage of people, as they're trying to shop for affordable quality health insurance."
He said many of these policies are sold by third parties, so the commerce department recommends consumers ask for the full name and address of the actual insurance company that will be underwriting the coverage.
Customers should also request the selling agent's National Producer Number, or NPN, to verify the agent is a legitimate agent.
"Is this policy legitimate? Am I dealing with someone who's licensed to sell, insurance here in Minnesota? We really encourage them to call the Department of Commerce."
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