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State Regulators to Target Marketers of ACA Coverage Alternatives

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What You Need to Know

  • Members of an existing antifraud task force talked about the new working group in May.
  • Trinidad Navarro, the Delaware insurance commissioner, raised the topic.
  • He said federal and state regulators have been meeting privately to discuss concerns about aggressive marketing practices, such as use of aggressive lead generation programs, for several months.

Some state insurance regulators want to crack down on companies that market health insurance products that could serve as an alternative to major medical insurance.

The National Association of Insurance Commissioners is setting up a working group that will look at marketing of products that may pay for some health care but that do not meet the Affordable Care Act requirements for major medical insurance.

“The working group will address the deceptive marketing of health plans and other products that lead consumers to believe they are purchasing comprehensive health coverage when they are really purchasing coverage that does not cover all pre-existing conditions or hospital care,” NAIC officials announced last week.

The new working group will be part of the NAIC’s National Antifraud Task Force.

The working group will help federal and state regulators track the marketing of non-ACA health plans.

It also will “review existing NAIC models and guidelines, including laws and regulations, that address the use of lead generators for sales of health insurance products and identify models and guidelines that need to be updated or developed to address current marketplace activities,” officials said.

The list of insurance products commonly marketed as ACA policy alternatives includes short-term health insurance, hospital indemnity insurance, critical illness insurance and accident insurance.

Non-Major Medical Health Insurance Market Basics

The NAIC is a Kansas City, Missouri-based group for state insurance regulators. States often start with NAIC model laws and model regulations, or sample statutory or regulatory texts, when drafting insurance bills and regulations.

The ACA is a two-law package that came to life in 2010. It imposes many product design and underwriting rules on major medical insurance policies, or policies designed to provide comprehensive, long-lasting health coverage.

Issuers’ new major medical insurance policies may not consider individuals’ health status when issuing or pricing coverage. In most cases, they must cover at least about 60% of the actuarial value of a standard package of health benefits, or “essential health benefits” package.

Under the ACA, major medical insurance policy issuers may not limit coverage for the products and services included in the essential health benefits package.

Federal regulators and an ACA provision have helped to create a separate market for more limited types of health insurance products, by exempting those products, such as short-term health insurance, from the ACA major medical insurance rules.

States generally apply pre-2010 insurance regulations, such as insurer solvency requirements and prohibitions against fraud, on issuers of potential major medical insurance alternatives.

However, in many states the issuers of those products can refuse to sell coverage to people with health problems, charge higher premiums for people with health problems, decide for themselves what they want to cover and impose annual and lifetime benefits limits.

Consumers can use ACA premium tax credit subsidies to reduce how much they pay out of their own pockets for major medical insurance coverage.

Supporters of the limited benefit products argue that use of medical underwriting and tailored benefits packages helps hold the full cost of the limited-benefit products down to what consumers are willing to pay.

Also, they argue that the limited-benefit products often suit the needs of consumers who are not eligible for premium tax credit subsidies.

Even regulators who support the sale of the limited-benefit products have said that marketers need to be open about the limitations of the limited-benefit products.

Working Group History

Members of the NAIC’s Antifraud Task Force talked about setting up a working group to address limited-benefit plan marketing concerns in May, according to draft minutes included in a task force meeting packet posted on the task force section of the NAIC’s website.

Trinidad Navarro, the chair of the task force and the Delaware insurance commissioner, said state and federal regulators have been meeting to discuss concerns about health plan marketing for several months.

The discussions have covered use of lead generators, unsolicited telephone calls and internet solicitations.

Regulators may need to develop a new model regulation to address aggressive health plan marketing and use of lead generators, and NAIC members may need to update the NAIC’s internet sales “white paper,” or discussion paper, to reflect current marketing strategies, Navarro said.

Navarro said he expected the new health plan marketing working group to meet in closed, regulator-only sessions.

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(Image: Adobe Stock)