States Settle With a Short-Term Medical Issuer As Fight in D.C. Looms

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A regulator group that includes 41 states and the District of Columbia has agreed to a $5 million short-term medical insurance settlement with HCC Life Insurance Company and an HCC Life medical insurance affiliate.

HCC Life, a Houston-based company that’s now part of the Tokio Marine Group, stopped selling short-term medical insurance in June. The company has denied any wrongdoing or any activities that violate state insurance laws or regulations.

The 42-jurisdiction regulator group accused the company of having deficiencies in the handling short-term medical claims, according to officials at the California Department of Insurance.

The settlement agreement comes as the administration of President Donald Trump is working on proposed short-term medical insurance regulations. Under former President Barack Obama, the U.S. Department of Health and Human Services (HHS) capped the coverage term for short-term medical insurance policies at 90 days. The Trump administration has proposed leaving the maximum length of short-term medical policies up to state insurance regulators.

(Related: What If They Roll Back the Short-Term Health Time Limit?)

The HCC Life settlement agreement calls for HCC Life to pay the $5 million to the 42-jurisdiction group that ran the HCC Life short-term medical business examination.

The agreement also calls for HCC Life to:

• Pay the claims left over from its short-term medical run-off business in a timely business.
• Let an examiner audit HCC Life’s handling of the run-off claims.
• Audit the performance of its own producers, third-party administrators, managing general agents and contractors.

HCC Life has also agreed to stay out of the short-term medical insurance market within any of the settling states for at least five years.

The lead states for the multistate regulator group are Florida, Indiana, Kansas and Utah.

HCC Life’s Response

Doug Busker, an HCC executive, said in an email that the settlement agreement does not identify any deficiencies in sales, marketing or claims practices at HCC Life, or at the HCC Life medical insurance affiliate, HCC Medical Insurance Services LLC.

The agreement does not contain any admission of wrongdoing by HCC Life or HCC Medical Insurance Services, Busker said.

The insurers “agreed to the settlement in order to resolve disputed matters associated with this former line of business and agreed to pay $5 million to the settling states for the examination, administrative costs and compliance,” Busker said.

The insurers “fully cooperated with the review and have obtained a full release from participating states related to the review,” Busker said.

Coverage Term War

The new 90-day limit on the length of short-term medical insurance policies took effect in early April.

Before that, limits varied from state to state. The limit in some states was 90 days. In some states, short-term policies could stay in effect up to 364 days.

Federal legislative analysts reported earlier this year that only about 160,000 people had short-term medical insurance policies in 2016, before the coverage period limit took effect.

Short-term medical insurance issuers and many regulators have argued that the coverage period caps limits consumers’ access to a useful product that has been around for decades.

Short-term medical insurance falls outside the jurisdiction of the Affordable Care Act underwriting and benefits rules.

ACA supporters and some major medical issuers have argued that, if the Trump administration eliminates the federal cap on short-term medical insurance, that could help short-term medical issuers to lure away younger, healthier consumers with plans that use medical underwriting, have low annual benefits limits, or exclude coverage for services such as maternity care or mental health care.

Some consumer, patient and health care provider groups that are strong supporters of the ACA have made protecting the 90-day coverage  period limit a priority.

The Association for Community Affiliated Plans, for example, today reported that an analysis it commissioned found that eliminating the 90-day coverage period limit could ultimately lead to about 1.9 million people to shift from ACA-compliant individual major medical policies to short-term medical insurance.

California Insurance Commissioner Dave Jones drew attention to the HCC Life settlement agreement, by publicizing it in a press release issued Tuesday, and he pointed out the connection between short-term medical insurance and ACA requirements.

“Short-term health plans typically contain significant exclusions and do not contain all benefits required by the ACA,” Jones said in a statement included in the release. “Insurance companies and producers that sell these products may not adequately explain these limitations at the time of sale, leading to consumer confusion and dissatisfaction.”

— Read 3 Flares From the Short-Term Health Firefight on ThinkAdvisor.

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