PrudentChoice, an Irvine, Cal.-based seller of discount health plans, was charged with violating Vermont’s Consumer Fraud Act. Attorney General William Sorrell said charges were based on the sale of plans to at least 89 Vermont residents at a cost of over $25,000. The problem was that PrudentChoice couldn’t make good on its promises of discounts on services by physicians, hospitals, dentists and other health care providers.
Sorrell’s office surveyed 24 customers, 21 of whom said they could not find a participating provider.
In the settlement, filed last week in Washington County Superior Court, PrudentChoice must pay the state $33,000 in civil penalties and $5,000 in costs.
The Associated Press quoted PrudentChoice attorney Craig Zimmerman as saying, “PrudentChoice has never had any unsatisfied members in the state of Vermont. PrudentChoice adamantly believes there’s a place for discount health care in Vermont and in the United States.”
This is another “Business 101” rule. Make sure that you can deliver anything your company sells. And if you discover you can’t, seek legal counsel and implement appropriate changes immediately.
For the record, although the charge was fraud, this could have been an example of the cart before the horse. The provider enlistment group may have missed a deadline for signing up health care providers (physicians, hospitals, dentists, etc.) and left the sales/marketing department uninformed. Although this scenario could look like fraud, it would have no fraudulent intent. This whole case could have been nothing more than poor internal communications and/or lack of clearly defined accountability.
In most well run companies, the executive team would know there was trouble long before any attorney general filed charges. Further, it is more cost effective to fix legal problems like the one above as soon as they are discovered.
The effect on a company’s bottom line can be tremendous.