E&C Investigation Finds Millions of Americans Enrolled in Junk Health Insurance Plans that Are Bad for Consumers & Fly Under the Radar of State Regulators
Energy and Commerce Chairman Frank Pallone, Jr. (D-NJ), Health Subcommittee Chairwoman Anna G. Eshoo (D-CA) and Oversight and Investigations Subcommittee Chair Diana DeGette (D-CO) today released a report on the Committee’s year-long investigation into the anti-consumer practices of Short-Term, Limited Duration Insurance (STLDI) health care plans and the insurance brokers who sell and sign people up for these junk plans.
“The Committee’s investigation finds that the Trump Administration’s policy to expand unregulated and misleading plans is a threat to the health and financial well-being of American families, particularly during the COVID-19 crisis,” Pallone, Eshoo and DeGette said. “These plans are a bad deal for consumers and oftentimes leave patients saddled with thousands of dollars in medical debt. The heavy-handed tactics uncovered in this investigation demonstrate why Congress must reverse the Trump Administration’s expansion of these junk plans. It also shows how dangerous a post-ACA world would be if Republican Attorneys General and the Trump Administration are successful in striking down the law and its protections for coverage of pre-existing conditions.”
The investigation found that enrollment in these plans, which offer bare bones health coverage and engage in heavy-handed tactics to avoid paying medical claims, increased significantly to approximately three million consumers in 2019, a 27 percent increase from 2018. The growth in enrollment came after the Trump Administration issued a final rule in August 2018 that extended the maximum duration of the plans and allowed them to be sold alongside plans that comply with the Affordable Care Act’s (ACA) consumer protections. Earlier this week, Health Committee leaders unveiled The Patient Protection and Affordable Care Enhancement Act, which would reverse the Administration’s expansion of these junk plans.
The Committee investigation finds these plans are bad for consumers:
- All eight insurers deny claims for medical care after putting consumers through an extensive and invasive claims review process. The insurers subject consumers to a post-claims review process to determine whether the medical condition for which the claim was submitted may have arisen from a pre-existing condition or whether the health condition should have been disclosed by the applicant in the plan application. All eight insurers deny a medical claim if a determination is made that the medical claim was due to a pre-existing condition and subject to the pre-existing condition exclusion, or that it resulted from a pre-existing condition. Claims are also denied if the STLDI insurers determine that there were risk factors present at time of enrollment, or the medical condition manifested itself in such a manner that would have caused an ordinary prudent person to seek medical advice or treatment. The investigation also found that some STLDI insurers sometimes refuse to pay for medical claims that are not due to pre-existing conditions or subject to any of the plan’s exclusions and limitations. The claims are processed only after consumers retain attorneys or file complaints with state regulators.
- Most STLDI insurers rescind coverage, leaving consumers uninsured and with large medical bills. Most STLDI insurers rescind the underlying policy if a determination is made that the enrollee had a prior health condition that should have been disclosed in the plan application, or if there were certain risk factors present at the time of enrollment that the individual failed to disclose. Some STLDI insurers disenroll consumers and deny claims for individuals who develop medical conditions after enrollment. These individuals often have their claims denied for medical conditions that they were not previously diagnosed with or sought treatment. In these instances, these companies assert that the consumer failed to disclose they had testing performed or were advised to have treatment or further medical evaluation. Some STLDI plans also rescind policies of cancer patients and deny claims related to cancer treatment.
- STLDI insurers systematically exclude coverage for most major medical conditions resulting from pre-existing conditions, as well as coverage of basic medical services that consumers would reasonably expect to be covered by health insurance. STLDI insurers exclude coverage for most common medical diagnoses resulting from pre-existing conditions, including diabetes, cancer, stroke, arthritis, heart disease, and substance use and mental health disorders. Some of these plans impose significant coverage limitations and exclusions on the limited benefits and services that are covered, including emergency services, hospitalization, substance use and mental health disorders, and prescription drugs. In a few cases, STLDI plans exclude coverage of routine care such as basic preventive care, wellness exams, pelvic exams, pap smears and birth control.
- STLDI plans impose limitations on the benefits covered. Many of these plans impose significant limitations on doctor’s office visits, hospitalization, emergency services, substance use and mental health disorders, and prescription drugs. For instance, some of these plans impose a maximum of $500 per policy period for doctor’s office visits, a maximum of $1,000 per day for hospitalization, $500 per visit for emergency services, and a maximum of $2,500 per surgery for surgeon services. Consumers who fall sick while enrolled in one of these plans may incur huge, potentially financially ruinous, medical costs.
- STLDI insurers screen consumers for health status and discriminate against people with pre-existing conditions and women. Most of the insurers under investigation require consumers seeking coverage to complete invasive and complex plan applications that require disclosure of medical history. These same insurers deny coverage altogether to individuals with pre-existing conditions. They also discriminate against women by denying women basic medical services and charging women more than men for the same coverage.
- On average, less than half of the premium dollars collected from consumers are spent on medical care. The investigation found that on average across the eight companies that offer STLDI products only 48 percent of premium dollars a consumer pays are paid out in the form of health care claims and medical benefits. This is in stark contrast to ACA-compliant individual market plans, which are required to spend at least 80 percent of all premium dollars on health care claims.
- Marketing materials provide consumers misleading information. The Committee finds that some marketing materials for the STLDI plans provide incomplete and often misleading information about a plan’s limitations and exclusions. Misleading and fraudulent marketing practices are particularly concerning amid the COVID-19 public health emergency. Many uninsured individuals may be seeking to enroll in health coverage, and given the Trump Administration’s refusal to allow for an Open Enrollment period on the ACA Marketplaces, uninsured individuals may turn to STLDI plans as an alternative form of coverage.
- Brokers receive up to ten times the compensation rate for STLDI plans than for ACA-compliant plans. The Committee reviewed 14 companies’ broker compensation rates and found that the average commission rate for STLDI plans was 23 percent. The commission rate for ACA-compliant plans was an average of 2 percent in 2018. As a result, brokers may be incentivized to engage in deceptive and fraudulent misleading marketing practices or led consumers to these plans instead of ACA-compliant plans.
The Committee’s investigation also found millions of Americans are enrolled in these plans that fly under the radar of state regulators:
- STLDI plans represent a significant and growing proportion of the individual health care market. Approximately three million consumers enrolled in STLDI plans during the 2019 plan year across nine insurers, which was an increase of 600,000 over the 2018 plan year. Additionally, enrollment by brokers increased by approximately 60 percent in December 2018, and by over 120 percent in January 2019, compared to previous months. The increase in enrollment in December and January suggests that these plans are benefiting from, and possibly capitalizing on the marketing and advertising around the ACA’s open enrollment season.
- STLDI plans operate in a significant regulatory gap, with little oversight. The Committee finds that among states that allow these plans to be sold, some states have little information about the availability and type of STLDI plans sold in their states. State regulators also face challenges in taking disciplinary action and enforcement against insurers found to be in violation of their state laws. For example, insurers who offer STLDI plans through out-of-state associations can bypass state laws and regulations in states in which they do not file their products. As a result, states face significant challenges in monitoring and regulating STLDI plans. Currently, 24 states have banned or restricted the sale of STLDI plans.
In March 2019, the Committee officially launched its investigation by sending letters to 14 companies that either sell or assist consumers in enrolling in STLDI plans, requesting documents and information about industry practices. The Committee also conducted phone calls with all of the companies and followed up over the past 12 months to request additional information and seek clarification as needed.
Read the full Committee report HERE.