AG Announces Settlement With Colorado Discount Medical Benefits Plan

Last spring I wrote about the lawsuit that was filed by the Colorado Attorney General against Consolidated Medical Services, LLC.  Consolidated Medical Services was a discount plan (ie, not health insurance but a cheaper substitute that wouldn’t provide much in the way of benefits if a person needed medical care) run by Joseph Benedetto.  The Colorado discount medical benefits plans were, according to Colorado Attorney General John Suthers, “… fraudulent, frequently failing to pay patients’ claims as promised.”  However, the focus of the lawsuit was the manner in which Benedetto and his LLC went about recruiting affiliate salespeople.  According to the AG press release, “Consolidated Medical Services recruited individuals, many of whom are elderly, to market “medical benefits programs” that were advertised as valid substitutes for traditional health insurance.”  Salespeople were charged start-up fees and monthly hosting fees in order to sell the discount medical benefits, and virtually none of them made enough money selling the product to recoup the fees they had paid.  Only about three percent of the 12,800 affiliates who were recruited between 2008 and 2011 made any money at all selling the discount plan, and most of the few who did make money earned less than they had paid in fees.

Attorney General Suthers’ office announced today that a settlement has been reached with Joseph Benedetto and Consolidated Medical Services, LLC.  Benedetto must pay a $250,000 fine and he’s prohibited from running any sort of affiliate program to sell Colorado health insurance, medical benefits or any other healthcare-related services or products.  He’s already returned $100,000 to his affiliates, and Suthers’ website mentions that Benedetto must also “honor certain written guarantees given to affiliates”, although the scope of that part of the ruling is unclear.

Discount medical benefits plans are usually not the best option for most people, since they don’t provide the sort of safety net that quality health insurance policies do.  I’m sure some people do make money selling discount medical plans, but there are plenty of traps for the unwary – both salespeople and customers.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for healthinsurance.org, medicareresources.org, Verywell, Spark by ADP, and Boost by ADP, and Gusto. Follow on twitter and facebook.

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