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.
Here’s how the GAO directors describe that encounter:
The sales representative appropriately referred us to a Patient Protection and Affordable Care Act (PPACA)-compliant plan. Specifically, during the call, the sales representative stated that a short-term insurance plan would not provide coverage for us due to our pre-existing condition. The representative further explained the steps we should take to obtain the proof necessary to qualify for a Special Enrollment Period in order to buy a PPACA-compliant plan outside of open enrollment
But two excepted benefits reps gave information that was unclear or incomplete, the GAO directors say.
Seven of the excepted benefits reps, and the health care cost sharing ministry rep, ”engaged in potentially deceptive marketing practices, such as claiming our pre-existing condition was covered when the health plan documents we received after purchase said otherwise,” the directors write.
In one case, for example, an investigator pretended to have diabetes and called a rep who sold limited-benefit plans.
Here’s how the GAO officials describe that encounter:
The representative told us that he was enrolling us into a health plan that was subsidized by the state due to our low income, and that the state required us to purchase supplemental insurance in order to receive these benefits. Moreover, the representative told us that the state subsidy was not available to anyone if they received comprehensive medical insurance. However, when we subsequently asked another representative for clarification on this issue, the representative told us that the state had nothing to do with the product we were purchasing and that the state was not providing any financial assistance.
The first rep told the undercover investigator that the limited-benefit plan would cover emergency room visits completely, even though the plan provided no benefits for emergency room treatment.
The rep also told the investigator that the investigator would get free diabetic medication. Instead, “we were enrolled in two non-insurance prescription discount programs that would not provide us with our prescription for free,” officials write.
The first rep also:
- Failed to tell the investigator that the investigator was being enrolled in an accidental death and dismemberment policy or joining a small business advocacy, education, and service association.
- Told the investigator that the investigator did not need to read the policy application before signing and enrolling, because the application did not contain information that pertained to the investigator’s coverage.
Several other reps also refused to provide plan documents until the caller had signed up for coverage.
When an undercover investigator called the health care cost sharing ministry rep, during the ACA open enrollment period, the rep described the arrangement as insurance that met ACA requirements and that was sold by an insurance carrier, GAO officials say.
The rep “did not state that it was a non-insurance health share plan,” officials write.
The health care cost sharing ministry rep also claimed that the investigator was unlikely to be able to get individual major medical insurance in the investigator’s state, even though several ACA-compliant individual major medical insurance policies were available in that state, officials write.
“The representative also told us that we would be required to enroll in the plan prior to receiving documents describing the policy’s coverage,” officials say.
The GAO conducted the investigation for two Democrats in the Senate, which is controlled by the Republicans. That means the study might not get much attention in the Senate, unless and until the Democrats regain control of the Senate.
But the GAO directors say they intend to talk to the Federal Trade Commission and state insurance regulators about the sales reps who appeared to be engaging in deceptive sales practices.
Representatives for the U.S. Department of Health and Human Services said in a comment on the GAO’s findings that HHS takes consumer protection very seriously.
States are responsible for overseeing the sales of excepted benefits products, but HHS has some ability to oversee agents and brokers who sell individual coverage through HealthCare.gov, HHS officials said.
“HHS plans to review any sales representatives who GAO identified as engaging in potentially deceptive marketing practices to determine if they are registered with the exchange,” HHS officials said. “If they are registered, HHS will take appropriate action within the scope of our authority.”
— Read Short-Term Health Insurers Are Mobilizing, Too: Jeff Smedsrud, on ThinkAdvisor.