Mary Lloyd's husband was lying in the intensive care unit of an Arizona hospital when she got a good look at their new health insurance card for the first time.

Then she got the shock of her life. The card read: "This is NOT an insurance card."

For the retired couple from East Bethel, it was the beginning of a financial nightmare that left them with at least $50,000 in unpaid medical bills. They discovered that the new "health plan," they signed up for in January, for $499 a month, wouldn't pay for any of his medical care.

"I was royally duped," said Mary Lloyd, a painful admission from a woman who spent 27 years as a clinic and hospital manager. "I understand health care, and I understand health insurance," she said. "That's why I was so mortified that this happened to us."

No one knows how many customers have fallen into this trap. But dubious health plans are "spreading like poison oak all over the country," says James Quiggle of the Coalition Against Insurance Fraud, a nonprofit watchdog in Washington, D.C.

Consumer advocates say companies are taking advantage of the recession and the growing number of uninsured people -- 1 in 5 American adults under age 65 -- to sell "health coverage" that evaporates when customers try to use it, or provides far less than promised.

Just last month, Minnesota Attorney General Lori Swanson sued two out-of-state companies for allegedly misleading customers with phony claims about their health plans; and ten more investigations are underway, she said.

"Here, they're targeting people who are pretty sophisticated, and who really asked all the right questions," Swanson said. People believe them, she said, because they're "so desperate to find affordable coverage."

'Wonderful, you qualify!'

Last December, Mary Lloyd spotted the commercial on late-night TV. A Florida company, Cinergy Health, advertised medical coverage for as little as $5 a day. She thought it was worth a call. Her 60-year-old husband was set to retire as a deputy sheriff in Isanti County, and it would cost $1,200 a month to continue his coverage -- too pricey, she thought.

If she had done a Google search, she would have discovered that Cinergy had been cited in Florida for misleading advertising in 2006. (This past summer, it was forced to drop the TV ads after a similar investigation by New York insurance regulators.) But at the time, Mary Lloyd says, she wasn't particularly suspicious.

A salesman from Louisiana called her back, and pointed her to a website: It offers "limited medical health plans" that promise "first dollar coverage" with no copays and an array of choices, including "unlimited surgical benefits."

Mary, who took meticulous notes, initially chose a plan for $588 a month. The salesman, who identified himself as Darryl Williams of Mid South Benefits, promised it would cover all preexisting conditions, Mary Lloyd recalled. After a few questions, "he said, 'Wonderful, you qualify.' "

A month later, they were still waiting for something in writing. With their old insurance expiring in two days, Mary Lloyd called Williams in late January. That's when the salesman offered to switch them to a better and cheaper plan. She admits, in retrospect, that she didn't ask a lot of questions. Running out of time, she simply agreed.

Eight weeks later, while vacationing in Arizona, Anthony was hitting a bucket of golf balls at a driving range when pain shot across his shoulders. He tried to shrug it off. Friends rushed him to Banner Boswell Medical Center in Sun City, and he heard the words: "He's having a heart attack."

'This is terrible insurance'

Mary Lloyd peeled out her insurance cards the next morning in the hospital's business office. Doctors had discovered a 100 percent blockage in her husband's artery. Fortunately, they had cleared it quickly enough to prevent heart damage. Now Anthony was resting in the ICU.

The business agent took the cards, Mary Lloyd said, and threw them back on the counter.

"She said, 'This is terrible insurance. This is not even insurance,' " Mary recalled.

Puzzled, she studied one of the cards: It read "Secure Care" by the United Service Association for Health Care (USA+), a nonprofit membership group in Texas. Their health plan turned out to be a "health care savings" program that offers discounts at participating providers. The customer, not the company, must pay the bills.

Mary Lloyd was sure there had been a mixup. But the hospital business agent took a hard line, she recalled. "She said 'you need to pay and you need to pay today.' By that time I was so mortified I could hardly stand up."

She called salesman Williams for help, but no one ever called back, Mary Lloyd said. (His employer, Mid South Benefits, said last week that Williams had been "terminated," but didn't answer questions about the Lloyds' case.)

When she tried to call Secure Care, she said, "the call would not go through. It was like calling the moon."

The Lloyds learned that their "membership plan" included a limited insurance benefit: up to $8,000 for an operation, and $1,000 a day for hospital care. But the Lloyds never got any of it. In spite of the salesman's promises, their entire claim was rejected because of a preexisting condition: Anthony's high blood pressure.

By the time Anthony Lloyd was discharged two days later, his bills totaled $67,000.

Keeping promises

Mary Cranon, executive director of the United Service Association, said the Lloyds should have known what they were buying because it was spelled out in the handbooks they received in February. She didn't address the salesman's claims, saying only that the programs are marketed by "independent contractors." But she said the company lived up to all its promises.

In a letter to the Star Tribune on Friday, Cranon said that under the "contracted rate," the Lloyds will get a $15,000 discount on their medical bills, lowering the total from $67,000 to $52,000.

Mary Lloyd said that was news to her. The Lloyds received a bill from the hospital in September, saying they still owed the original amount.

The hospital would not comment, except to say that it's willing to work with patients in financial hardship. It did, however, issue a written statement saying "we truly regret that the Lloyds felt they were treated rudely."

Quiggle, of the coalition against insurance fraud, said the Lloyds' story is a familiar one. "People don't realize how insidious these plans are," he said. "They're being peddled all over the country."

It's fine, he adds, if companies are honest about what their policies cover and what they don't. But many aren't, he said, and it can be tough to stop them.

"One of the problems is that these operations are like ninja warriors," he said. "They can disappear quickly in the dark and then reappear with a whole new name and identity, selling the same junk." Experts say consumers should read the policy before they buy and check with state regulators if they have questions.

The Lloyds are unsure of their next step. A lawyer told them fighting the case could take two years and $50,000. They filed a complaint with the attorney general's office this month, but they have yet to approach the hospital to try to work something out.

"I don't want to shirk my responsibility," said Anthony Lloyd. "But if they're expecting $63,000 ... they're barking up the wrong tree. I'm on a pension."

Meanwhile, they both bought real health insurance. When Mary's card arrived in the mail, she cried.

"Because I know how important insurance is," she said. "I've had it my whole adult life. To be without it is dreadful."

Maura Lerner • 612-673-7384