Two Firms Sued Over Health 'Insurance'

All three were tricked into buying what they thought were health insurance policies that turned out to be empty promises, according to two lawsuits filed Wednesday by Minnesota Attorney General Lori Swanson.

Swanson accused two out-of-state companies, Consumer Health Benefits Association and Home Health America LLC, of "scamming Minnesotans citizens."

She also warned consumers to be on guard against increasingly sophisticated bait-and-switch tactics that target the 46 million uninsured Americans who are searching for affordable health insurance.

"We're seeing companies now exploit the high cost of health care," she said, to sell products that "offer little or no financial protection if you get sick." More than 2,000 Minnesotans have bought products from one of these two companies since 2003, she said.

In these cases, she noted, "Both of the defendants have run into trouble with the law in other states, but obviously didn't learn [their] lesson." Neither company is licensed to sell insurance in Minnesota, Swanson said.

Company officials did not respond to requests for comment.

But some of their customers, who accompanied Swanson at a news conference on Wednesday, said they tried to cancel their "policies" as soon as they realized they had been misled. "It was embarrassing, like they caught me off guard," said Jack Mordh, of North St. Paul, who was a licensed insurance broker. He said he didn't get his money back until he filed a complaint with Swanson's office.

According to the lawsuits, sales agents for Consumer Health Benefits Association of Coconut Creek, Fla., told customers over the phone that its "New Choice Health Plan" was an insurance plan or "just like health insurance," covering 80 percent of medical expenses. But when they received written material after signing up, customers discovered that it's really a discount program that offers a "30 percent discount" from participating doctors.

Larry Gerwing, of Big Lake, said he was stunned when he read that. On the phone, he said, he had grilled the sales agent "in detail" to make sure his bills would be covered.

"They answered it the way I wanted to hear it," he said. "Unfortunately, it wasn't true."

More than 40 percent of customers tried to cancel in the first month; 94 percent within a year. That shows, Swanson said. "that people were not getting what they bargained for."

She noted that Consumer Health had been sued by the Illinois attorney general over similar sales tactics, and had agreed in 2007 to tape-record sales conversations to ensure that customers weren't being misled. But in this case, she said, salesmen recorded only part of the conversations, and persuaded customers to go along despite a script affirming that this was not insurance.

The lawsuit includes a tape transcript in which a sales person says "Just go along with me on this." If customers balked, the salesmen would stop the tape and start over, insisting it was required by regulators, Swanson said.

Gerwing admits that this "should have been a red flag," but said he was told he couldn't get the insurance if he didn't go along with the script.

The second suit accuses Home Health America of Yuma, Ariz., and owner Michael Woodward of deceiving elderly customers, including 93-year-old Marguerite Fenner of West St. Paul, by selling policies that purport to offer home health care for one-time payments of $3,000 to $4,000. Fenner paid, but never got the care, and after several futile efforts to reach the company, finally got only about half of her money back.

The lawsuit says another customer, who was not identified by name, was a retired deputy attorney general who was lured by an ad into buying the coverage. When he ran into trouble getting services, he filed a complaint with Swanson's office and got a refund.

Swanson said some customers got some home health services, but the company cut them off after several months. Two other states, Oregon and Washington, have accused the company's owner of deceptive marketing, Swanson said.

Mordh, of North St. Paul, said he hopes the lawsuits will help others avoid "getting duped." Now he buys health insurance through a Minnesota company, and though it's more expensive than Consumer Health, he said, "at least it's real insurance."