FTC cracks down on a health insurance scam

Several marketing companies accused of leading people to believe they were buying health insurance when the companies were offering only a supposed discount card issued by a made-up trade association were banned from selling health care-related products, the Federal Trade Commission said on Tuesday.

Consumers were charged $50 up to several hundred dollars initially, the FTC said, and then a monthly fee of $40 to $1,000 for the purported health insurance. The phony trade association was called the Independent Association of Businesses (IAB).

Those who bought in got supposed discounts for such things as identify-theft protection, roadside assistance and "some discounts and reimbursements on visits to certain doctors or hospitals, subject to broad exclusions and limitations," the FTC said. They did not get health insurance.

The FTC first took action against the defendants in 2012, shutting down its telemarketing operation.

Defendants included in the permanent ban are: IAB Marketing Associates, Independent Association of Businesses, HealthCorp International, JW Marketing Designs, International Marketing Agencies, International Marketing Management, Wood LLC, James C. Wood and his sons, James J. Wood and Michael J. Wood, and his brother, Gary D. Wood.

A $125 million judgment was imposed along with the ban, but much of that will be suspended, the FTC said. The suspension of the remainder will take effect when the defendants turn over to the government nearly $2 million. Among the assets: a Lamborghini, two Mercedes, a Porsche and an MG Roadster.

The FTC offers guidance on its website about often-deceptive marketing ploys that make discount cards appear to be some form of health insurance. The key, the FTC said, is to understand the details you're agreeing to before you pay for anything.

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    Mitch Lipka is an award-winning consumer columnist. He was in charge of consumer news for AOL's personal finance site and was a senior editor at Consumer Reports. He was also a reporter for The Philadelphia Inquirer and the South Florida Sun-Sentinel, among other publications.