We’ve written several articles over the years about the importance of skepticism when an insurance product just seems too good to be true (ie, no medical underwriting and premiums that are a fraction of the cost of most policies on the market). Often, those policies are actually discount plans or mini-med coverage that won’t provide much of anything in terms of coverage when it’s actually needed.
The Colorado Division of Insurance has a good page with warnings and advice to consumers who are considering medical discount plans. These plans are generally legal, but buyers definitely need to understand what they’re getting into before they sign up – especially if they’re dropping a standard health insurance policy to switch to a discount or mini-med plan.
With shady medical benefits companies, the focus tends to be on consumers getting ripped off. In an interesting twist, the Colorado Attorney General has filed suit against a Highlands Ranch, Colorado LLC, Consolidated Medical Services, but the lawsuit isn’t regarding their product. It pertains to the way in which they recruit – and allegedly scam – their affiliate marketers.
Consolidated Medical Services, LLC markets both mini-med and discount plans. I’m not going to link out to their site, but you can check out the details at ivegotcoverage dot com. It’s a pretty typical website for that sort of product, with lots of great-sounding claims and sample cases where members have supposedly saved thousands of dollars. But they also have a link for people who want to “become a reseller”. And their process of getting recruits enrolled to sell the product is what has come under the watchful eye of the Colorado AG. The Better Business Bureau (Consolidated Medical Services, LLC has an F rating) has a summary of the government action against the company over the past couple years – the Colorado lawsuit is the most recent, but issues have been ongoing since 2010.
Basically, the company has been charging recruits a “startup fee” that ranges from $35 to $345. And then to be able to sell the mini-med and discount plans online, the recruits had to pay a monthly fee of $29.95, along with significant other marketing expenses. The lawsuit claims that less than 3% of the recruits made any money in the program, and most of them actually lost money – they spent more on the fees required to be part of the company than they earned selling the plans.
Although we always encourage consumers to read the fine print and carefully examine coverage options that seem too good to be true, the same warnings can be extended to people who are considering a career selling such policies. And any program that requires you to cough up money just to get started should raise some red flags.