Minnesota Attorney General Lori Swanson is suing two out-of-state companies for selling allegedly fraudulent health insurance coverage to the uninsured.
The companies being sued are Home Health America of Nevada and Consumer Health Benefits Association of Missouri. Neither firm could be reached for comment.
Swanson says the companies led consumers to believe they were buying inexpensive comprehensive health insurance.
"Companies that we sued today scammed consumers struggling with the high cost of health care into paying for products that offered very little protection," said Swanson. "People thought they were buying health care coverage at an affordable price, when they were really buying unregulated products that offered little benefits."
One company marketed around-the-clock home nursing and medical services to senior citizens for a one-time payment. The other promised coverage to people fresh out of college or unemployed for attractively low premiums and limited co-payments.
According to court documents, Home Health America charged a lump sum of $3,000 to $4,000 to seniors, some of whom were never able to access the nursing care they were told of and others whose reimbursement for care ended after a few months.
One woman told state authorities that her frustration with the company led her to cancel her policy and seek a refund, but the company took $1,250 off the top as an application fee.
The Consumer Health Benefits Association lawsuit accuses the company of baiting customers into buying what were actually "health discount plans," which fall short of traditional insurance and can leave customers to foot bills for services they understood to be covered.
Minnesota customers who signed up with Consumer Health Benefits canceled at a staggering rate.
The lawsuit said 41 percent of the 2,250 Minnesota residents who enrolled with the company since 2003 shed the plan after the first month, and 94 percent dropped it within a year. But many were out $250 or more in sign-up costs.
That happened to 21-year-old Sarah Skluzacek, of Eagan. Just out of college and caring for a 2-year-old daughter with kidney problems, Skluzacek said a salesman pressured her into buying a low-priced plan.
Upon receiving an information packet, she said she realized she had been duped. Skluzacek said she immediately canceled the plan, but her repeated requests for a refund went nowhere.
"It really is insulting and hurtful that someone has such disregard for any common person that they would outright lie and try to steal your money," Skluzacek said.
The lawsuits seek injunctions against the companies, civil penalties and restitution for affected customers.
The state is not pursuing criminal charges against the company. Swanson said she doesn't have that jurisdiction though she wouldn't rule out referring the cases to prosecuting authorities.
Consumer Health Benefits Association has previously settled claims of fraud and deceptive practices with the Illinois attorney general. The principal owner of Home Health America previously was stripped of his ability to sell policies in Washington state and Oregon amid fraud allegations.