It has been two years since President Trump issued an executive order aimed at promoting and expanding skimpy health coverage products as an alternative to comprehensive health insurance. These changes to regulations combined with messaging from the executive branch about choice and freedom effectively opened the floodgates for increased marketing of alternative coverage options. These products typically fail to provide the comprehensive coverage guaranteed in plans compliant with the Affordable Care Act (ACA). In some cases, people are left burdened with high medical bills or find out their plans won’t cover their health care needs.
States are warning consumers of fraud and about the inadequate nature of the products sold. Over the last year, we identified consumer alerts or press releases issued by 15 states warning about fraud or other concerns. In comparison, we found only one similar warning in a scan of these states’ websites from the prior four years.1 We spoke with regulators in five of these states to better understand what was behind these warnings and get insight into potential pitfalls for consumers.
Consumers Do Not Know What They Are Buying
State regulators said consumers are purchasing plans without understanding their limits. Regulators noted particular concern regarding a growing trend of robocalls selling insurance over the phone as well as websites that are designed to look like they sell health insurance but actually gather personal information to send to call centers or brokers generating robocalls. These websites are “causing mayhem” in the words of one regulator. Once on the phone, brokers make a hard sell for short-term plans, fixed-indemnity plans, or limited-benefit products bundled together. According to one regulator, these are sometimes misleadingly sold as “ACA-compliant.” Disclosures concerning the limitations of short-term plans are “too little too late” because consumers are talked into purchasing plans before they hear the information, according to a regulator.
Regulators also expressed concerns about the limits of health care sharing ministries, which don’t comply with insurance standards, as well as plans that are posing as ministries. One regulator reviewed broker training manuals for an entity claiming to be a ministry and found information likely to mislead consumers into thinking they are buying insurance. Another regulator found advertisements online for “Christian plans” that actually link to fixed-indemnity and short-term plans.
Some Entities Are Illegally Selling Insurance
Three regulators noted an uptick in activity from health care sharing ministries. Some states are responding to this increased activity by reviewing these entities for potentially operating as unlicensed insurers. Numerous states are investigating Aliera and Trinity. These two groups are working together to sell unlicensed insurance, according to three states — Colorado, Texas, and Washington. In one state, a regulator said they are examining whether other entities claiming to be ministries are illegally selling insurance.
States also warn consumers when they determine that association health plans are illegally selling insurance. Regulators are not aware of how many associations may be selling unlicensed insurance, often relying on consumer complaints or reports from brokers and agents, who can act as eyes and ears by providing early information about these products.
States Face Barriers to Protecting Consumers and Insurance Markets
All the regulators interviewed noted barriers to stopping fraudulent or misleading sales of alternative coverage. When it comes to robocalls, a regulator said it as “very, very, very difficult to take specific action.” Because, as mentioned previously, sites often send information to call centers and agents, consumers rarely have adequate information when filing complaints and regulators are therefore unable to identify the entity behind the call. One state has helped return premium dollars that consumers have paid and allowed them to qualify for special enrollment in ACA-compliant coverage. However, these people may still owe funds on unpaid claims or association membership dues.
Ministries, associations, and robocallers are all selling insurance across state lines, which presents another obstacle to state agencies. One regulator said stopping robocallers is “more appropriate for the federal government to address” since they operate nationally.
State regulators have been tasked with making sure consumers understand what they’re buying, protecting them against inadequate coverage and fraud, and ensuring that insurance plans meet state rules. Alerts and press releases sent by 15 states over the past year indicate states are seeing problems, yet interviews with regulators suggest this is just the tip of the iceberg. To ensure effective consumer choice and functioning health insurance markets, states must inform consumers of misleading insurance claims and deal forcefully with fraud on the part of brokers and those companies marketing illegal plans.