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Department of Managed Health Care Reaches Agreement With Discount Health Card Company Care Entree

Posted on: Tuesday, 26 September 2006, 21:00 CDT

In an agreement signed today, Care Entrée

acknowledged the jurisdiction of the Department of Managed Health Care

(DMHC) to regulate its discount health card business, and will seek

licensure to operate in California.

"This is important victory for consumers, and

will pave the way for the DMHC to set up consumer protections,"

said Cindy Ehnes, Director of the DMHC. "This

is a crucial step in our long-standing effort to ensure that California

consumers are protected from fraudulent discount health card companies,

and at the same time, that they have access to discount health cards

that do provide value."

Following an administrative law judge's

decision upholding the DMHC's jurisdiction

over discount health cards, Care Entrée agreed

to file an application for licensure with the DMHC by March 31, 2007. In

order to gain licensure, the company must demonstrate that it is

providing substantial and verifiable discounts to its members and that

it has made refunds in accordance with the terms of its membership

agreement to all enrollees who sought them. It must also comply with

important consumer protections in the law. Finally, it must meet the

licensure requirements required of health care service plans in

California.

The DMHC has been working since 2004 to shut down fraudulent card

companies and protect consumers. Discount health card companies offer a

membership program advertising lower fees for health care providers such

as doctors, dentists and hospitals, prescription drugs, optical products

and other services. Dishonest plans require relatively large enrollment

fees and arrange for automatic monthly payments to be debited from

checking accounts or credit cards but offer little, if any, benefit to

consumers. They often target lower income consumers, and those with

limited English skills.

In September 2004, the DMHC began an extensive campaign to protect

California consumers against fraudulent discount health card companies,

issuing a total of seven cease and desist orders requiring them to cease

doing business in California. The July 2005 order to Care Entree was

based on a DMHC investigation showing that the company was arranging for

health care services. State law requires any company arranging for

prepaid health care services, such as providing referrals to doctors and

hospitals, to obtain a license from the DMHC.

The Capella Group, parent of Care Entrée,

then challenged the legal authority of the DMHC to regulate discount

health cards. On June 15, 2006, the administrative law judge issued a

proposed decision upholding the DMHC's

jurisdiction, finding that the company was arranging for health care

services.

The California Department of Managed Health Care is the only stand-alone

watchdog agency in the nation, touching the lives of more than 21

million enrollees. The DMHC has assisted more than 633,000 Californians

through its 24-hour Help Center to resolve their HMO problems, educates

consumers on health care rights and responsibilities, and works closely

with HMO plans to ensure a solvent and stable managed health care system.

Source: Business Wire

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