QUESTION

What is a discount medical plan? What are the risks and benefits of buying one?

Individuals with no coverage | Comparing Plans: Benefits and Costs
ANSWER

A discount medical plan is not health insurance, and will not provide the kind of financial protection that you can obtain through a health plan on the health insurance marketplace. Companies selling these plans are supposed to notify their policyholders that the plan does not qualify as minimum essential coverage under the Affordable Care Act, meaning the consumer could be required to pay a tax penalty if they do not obtain health insurance. However, consumers should be aware that some of these discount plans may use marketing materials that suggest they provide traditional insurance.

Generally, consumers who sign up for a discount plan must pay an upfront enrollment fee plus a monthly subscription. In exchange, the plan offers discounts on medical services from doctors, hospitals and dentists. However, a number of state insurance regulators have had to shut down these plans because of fraudulent activity, and often the discounts they provide are no better than what you could negotiate on your own. Consumers who suspect that a discount plan is falsely advertising itself as health insurance should report the company to the State Department of Insurance. A list of state departments of insurance is available in Resources, Where To Go for Help. (26 U.S.C. § 5000A).

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