Many insurance agents who sell “excepted benefits” products, like short-term health insurance and critical illness insurance, are doing a good job of explaining the products’ limitations — but about one-third are not.
Roughly one-quarter may be doing such a bad job that they’re engaging in deceptive marketing practices.
Seto Bagdoyan, audits director at the U.S. Government Accountability Office (GAO), and Howard Arp, the GAO’s investigations director, gave that assessment Wednesday, in a report on a GAO investigation.
- A copy of the GAO report is available here.
- An article about Priority Health’s effort to combine short-term health with access to major medical coverage is available here.
The GAO team conducted the investigation for Sen. Robert Casey Jr., D-Pa., the highest-ranking member on the Senate’s Special Committee on Aging, and for Sen. Debbie Stabenow, D-Mich., a member of that committee.
Background: Individual Major Medical Insurance v. Other Health Insurance
Starting in 2014, the Affordable Care Act imposed many new restrictions on issuers of individual major medical insurance.
Whether a health insurer is operating inside or outside of the ACA public exchange system, or web-based supermarket for health insurance, it cannot use factors other than location when deciding whether to issue coverage, and it cannot use factors other than location, age and tobacco use when pricing coverage.
An issuer of an ACA-compliant policy must offer a standardized “essential health benefits” benefits package, and it must provide unlimited coverage for essential health benefits.
The ACA also imposes a maximum limit on an enrollee’s out-of-pocket spending on deductibles, coinsurance payments, co-payments, and other cost-sharing payments.
Like the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Affordable Care Act (ACA) “excepts” many products other than individual major medical insurance from the major medical insurance rules.
Those include supplemental products, such as dental insurance and vision insurance.
The list of excepted benefits products also includes some products that could be used as an alternative to major medical insurance, such as short-term health insurance, hospital indemnity insurance, and critical illness insurance. The GAO investigators classified those types of products as “limited-benefit” plans.
The ACA also exempts health care cost sharing ministries. A health care cost sharing ministry is an organization that is exempt from ACA major medical insurance rules, due to concerns about federal involvement in regulation of insurance organizations, that offers to use members’ contributions to pay for members’ health care expenses.
Background: Open Enrollment Periods
In an effort to push people to pay for coverage even when they feel healthy, health insurers and ACA public exchange programs have imposed an “open enrollment period” system.
During the open enrollment period, which runs from Nov. 1 through Dec. 15 at the federal government’s HealthCare.gov multi-state ACA exchange system, consumers can buy coverage without showing that they have what the government classifies as a good reason, such as moving to a new city, to buy coverage.
Outside the open enrollment period, and outside broad special enrollment periods created in response to emergencies, consumers who want to buy coverage must show they have a good reason to be shopping for coverage, and that they didn’t simply wait until they got sick to start paying premiums.
The GAO team looked into the sales practices of live-human agents who sell products that might serve as an alternative to products that meet the ACA individual major medical insurance standards.
Investigators made undercover calls to 30 representatives who were selling excepted benefits and one health care cost sharing ministry rep.
The investigators made some calls inside the open enrollment period and some at other times of the year.
The investigators always said they had a serious pre-existing condition, such as diabetes, or heart disease.
Twenty-one of the reps gave the undercover investigators good advice, Bagdoyan and Arp write in their report.
One investigator, for example, called a rep who sold short-term health insurance. The investigator called outside of the open enrollment period and pretended to have heart disease.