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WEST ST PAUL — Minnesota's attorney general on Wednesday sued two Texas companies she said falsely represented their discounted health care plans as medical insurance to thousands of customers.
The companies used words such as "premium" and "copay," and promised to cover 80 percent of medical expenses from a vast network of hospitals and doctors to persuade 4,600 customers in Minnesota they were buying an insurance policy, Attorney General Lori Swanson.
Direct Medical Network Solutions Inc. of Southlake, Texas, and Houston-based Association Healthcare Management Inc. provide limited discounted medical services through certain doctors and clinics, but their plans are not insurance policies, Swanson said.
She said neither company was licensed to sell insurance in Minnesota.
Rhonda Payne, general counsel for Associated Healthcare Management, said the allegations were false and that the company planned to vigorously defend itself in the lawsuit.
Direct Medical did not immediately return calls seeking comment.
"Health discount plans are not insurance policies and they don't provide financial protection if you get sick," Swanson said at a Capitol news conference.
Swanson said the weak economy and expensive premiums have pushed many to seek alternatives to insurance.
Swanson estimated that the two companies' customers in Minnesota had lost millions of dollars. She said her office was investigating similar complaints about roughly a dozen other companies.
Gary Sween, a 63-year-old retired salesman from Owatonna, Minn., said he had been struggling to get insurance because of a spinal condition. A Direct Medical representative called and offered him insurance for a $150 application fee plus $380 monthly premiums. Once the policy information arrived in the mail, he realized he had not bought insurance. After multiple phone calls, he canceled his plan but lost the application fee.
"When you get desperate for insurance you do things you wouldn't normally do," Sween said.
Swanson's lawsuits in Hennepin County District Court seek refunds for customers and an end to the companies' current marketing practices.
