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Direct Medical Network Solutions of Southlake, Texas, and Houston-based Association Healthcare Management, also going by the name Family Care, marketed discount plans to Minnesota consumers in part by misleading them into believing they were health-insurance plans, the lawsuits claim. The two companies sold the plans to about 4,600 Minnesotans.
At best, the plans marketed by the Texas firms offered limited discounts at select health care providers and not the 80 percent insurance coverage consumers believed they were signing up for, Swanson alleges.
"I felt like a fool," said Keith Romann, of Garfield, Minn., near Alexandria. "At 60 years old, you should not be getting conned. These guys were smooth." He said Family Care contacted him in a cold call last year after his wife lost her nursing job and the health care benefits that came with it. Romann, who is retired, wanted the traditional health care plan.
Even though he knew what discount plans were, he said, a salesperson assured him that what he was buying was health insurance. He plunked down an application fee plus his first month's premium, totaling about $400, before he realized he had been duped. After canceling the plan, he said he wasn't able to get his money back.
Family Care denied misleading consumers. "Family care received the lawsuit today and denies the allegations made by the attorney general, and we will vigorously defend the lawsuit," said Rhonda Payne, a spokeswoman for Family Care, on Wednesday.
Gregg Trautmann, an attorney for Direct Medical, said the company used a third-party marketer to sell its product. Direct Medical, he said, makes clear in its approved marketing script to consumers that the product is a limited discount plan.
Trautmann said Direct Medical is unaware if the third party marketer deviated from the script and is in litigation over the issue. The company has since suspended its sales in Minnesota, Trautmann said.
The lawsuits say that in selling to consumers, both companies used insurance terms such as "coverage," "deductible," "co-pay" and "premium" to confuse consumers. They told consumers that they cover 80 percent of medical expenses and have a vast network of doctors and hospitals. In fact, the companies don't provide health insurance and offer only limited discounts off the prices charged by a narrow number of providers.
Direct Medical charged consumers an enrollment fee of about $135 and a monthly "premium" of up to $459 per month. Family Care charged an enrollment fee of about $100 and a monthly "premium" of up to $109 or more, the attorney general's office said.
Both companies generally refused to send written materials for the consumer to review before a purchase. When the consumers did receive the written materials later, they often quickly canceled the plans.
The lawsuits, filed in Hennepin County District Court, seek restitution for consumers and civil penalties.