When Francesca Nuñez lost her job last year, she didn’t realize she was also going to lose health insurance. But that’s exactly what happened: her employer coverage ran out in December 2018 and she started looking for an alternative.
After exploring her options online, she was contacted by an insurance broker and signed up for a plan with a monthly premium of $245. Nuñez was healthy — the only medical conditions she had in the past were relatively minor: having a cyst removed and a hernia. When she signed up, she believed the new plan would at least cover an annual visit to her ob-gyn, whom she had being seeing for 14 years. When she had coverage through her employer, she never had a copay or received any bills after such annual check-ups. This time, after her annual visit, she received a bill for $300.
Nuñez was shocked. Having recently lost her regular income, she could scarcely afford the bill. She paid it, but subsequently cancelled the coverage, joining the ranks of the 30 million Americans who are uninsured.
This story is not unique — Nuñez is one of a few million people who may have purchased a plan that was not compliant with the Affordable Care Act’s (ACA) consumer protections. Insurers selling these plans are able to skirt the ACA’s protections and ask consumers about their health history to find out whether they might be expensive to cover, exclude benefits like prescription drugs or mental health services, kick people off if they get sick, or increase their price because of a preexisting condition. These practices were prevalent in the individual market before the ACA and left millions of people uninsured or underinsured.
Non-ACA-compliant plans are offered outside the ACA marketplaces and may seem attractive because they are cheaper. But, like many plans prior to the ACA, many leave people at risk of high medical bills because of hidden costs and limited coverage. These plans include short-term plans, association health plans, health care sharing ministries, and fixed indemnity plans.
In 2018, the Trump administration eased restrictions on short-term and association health plans to encourage their sale. In addition, Congress repealed the individual mandate penalty, effective this year. That’s important, because compliance with the mandate had required that people have plans that met the ACA quality standards. In the absence of the mandate penalty, these noncompliant plans are gaining traction.
As the number of plans have increased, states have taken action to warn consumers. At least 15 states, including Maryland where Nuñez lives, have issued consumer alerts or press releases warning consumers about fraud and the sale of skimpy coverage. State regulators have warned people about robocalls and websites that look like they sell health insurance, but instead send consumers’ personal information to brokers.
In Nuñez’s case, the broker who contacted her about the plan questioned her about her health and history of diseases. Although she was approved for the plan, neither the broker nor the insurance company told her that the plan covered preventive care only up to $120. She learned this after she called to inquire about the $300 bill after her ob-gyn visit. “I cancelled the plan because I was scared to go see the doctor after that, because I couldn’t afford those bills,” she said, adding that she would not recommend this plan to anyone.
Several states have passed laws or issued regulations to protect consumers from non-ACA-compliant plans. For example, 24 states and the District of Columbia have banned or placed limits on short-term plans. About half the states have taken steps to protect their markets and consumers from risks associated with association health plans, including fraud and insolvency.
With the 2020 open enrollment period now underway in the individual market, Nuñez’s story can be a cautionary tale: a cheaper plan with limited coverage may be a tempting option, but may leave even young and healthy people without basic coverage and saddled with large bills.
The authors thank Kevin Lucia, JoAnn Volk, and Dania Palanker of Georgetown University’s Center on Health Insurance Reforms for expert input.