“Full Coverage” Health Insurance Leads Victims of Fraud With Stacks of Bills

President Trump campaigned on a promise to repeal Obamacare. That promise died when the Senate was unable to decide on a politically palatable alternative to the popular healthcare program.

Presidents nevertheless wield significant executive power. Among his other efforts to change (or perhaps to undermine) Obamacare, President Trump recently signed an executive order that he claims will promote flexibility and competition in the health insurance market.

Unfortunately, two directives in the order have opened the door to insurance fraud that is victimizing consumers. One directive expands the ability of employers to make joint purchases of association health plans (AHPs).

Several state attorneys general sued to block the expansion of AHPs. According to a supporting brief filed by the American Medical Association, AHPs create “an undeniable risk of fraudulent or abusive insurance practices.” A government study found that in just a three-year period, fraudulent AHPs left more than 200,000 beneficiaries with $252 million in unpaid medical bills.

Executive Order Expands Short-Term Health Insurance Policies

The second directive expands the availability of Short-Term Limited-Duration Insurance (STLDI) policies. While the Affordable Care Act (ACA), popularly known as Obamacare, permitted the sale of STLDI policies, they were intended as stop-gap insurance for individuals who were between jobs that offered employer-provided insurance plans.

An STLDI policy was originally intended to provide low-cost, short-term insurance for no longer than three months. The policies were not renewable if the renewal would extend the policy term beyond three months.

After three months, individuals who purchased an STLDI policy were required to obtain the comprehensive insurance required by the ACA. Subsidies were available to individuals who could not find affordable or employer-provided insurance before the end of the three-month coverage period.

An STLDI policy is relatively inexpensive because it provides limited benefits. Unlike policies that comply with the ACA’s comprehensive requirements, an STLDI policy does not need to cover preexisting conditions, preventive care, prescription drugs, maternity care, or treatment for mental health conditions or substance abuse. An STLDI policy can also place caps on the benefits the policy will pay.

Some short-term insurance plans do not pay for treatment during the first several days of an illness, when treatment is most effective. Some short-term policies do not pay for cancer treatment during the first month after enrolling in the plan.

President Trump’s executive order required the Department of Health and Human Services to create a rule that would allow companies to sell renewable STLDIs that would last longer than three months. The final rule increases the permitted duration of STDLI policies to 12 months and allows them to be renewed for a total duration of up to 3 years.

Fraudulent Marketing of STLDI Policies

To an unwary consumer, a twelve-month STLDI policy may seem very much like a comprehensive policy that complies with Obamacare. While the final rule requires the policy and the application form to state that the policy “is not required to comply with certain federal market requirements for health insurance, principally those contained in the Affordable Care Act,” consumers rely on the insurance agents and brokers who sell them the policies to explain coverage limits. Consumers rarely read the policy and may only read the signature line of an application form that was completed by an agent or broker.

Some insurance companies and brokers have seized upon the expansion of STLDI policies to market them as a low-cost alternative to comprehensive policies that comply with Obamacare. Insurance brokers and agents pitch the policies as if they provide full coverage. Only after claims are rejected do consumers realize that they purchased policies that do not deliver what they were promised.

The Urban Institute reports that many consumers who purchase STLDI policies believe they are buying policies that are fully compliant with Obamacare. Risks to consumers include “coverage denials because of health status, refusal to cover services because of a preexisting condition, the retroactive cancellation of coverage for enrollees with certain medical claims, and surprise balance billing because of a lack of in-network providers.”

Some short-term health insurance plans fail to cover preexisting conditions that were undiagnosed at the time coverage was purchased. That makes it easy for companies to claim without proof that cancer and other serious medical conditions were “preexisting.” HHC Life, for example, refused to pay for a patient’s heart surgery after deciding that his heart problems were linked to undiagnosed conditions. The patient was left with $900,000 in medical debt.

The Urban Institute’s review of marketing practices found that online searches for “Obamacare plan” or “ACA enroll” typically return links to websites that sell STLDI policies. The websites often fail to make clear that the policies provide limited coverage. When consumers telephone for more information, telemarketers “push consumers to purchase the insurance quickly, without providing written information.”

Consumer Complaints About Short-Term Health Insurance Policies

In response to consumer complaints, the Federal Trade Commission (FTC) took action against Florida-based Simple Health Plans, LLC. The FTC contends that Simple Health Plans and affiliated companies misled consumers who believed they were purchasing full coverage.

According to the FTC, Simple Health Plans sold sham insurance plans that effectively left purchasers uninsured. According to the FTC, the sham policies failed to cover preexisting medical conditions, prescription drugs, specialty treatment, hospital care, surgical procedures, or medical and laboratory testing. The policies also placed unrealistically low caps on doctor’s visits and hospital fees.

Consumers were lured to Simple Health Plans through a network of websites that purported to provide neutral information about comprehensive health insurance. Consumers who called toll-free numbers spoke to telemarketers who falsely claimed to be licensed insurance agents. The telemarketers did not reveal that they were selling medical discount plans, not the comprehensive coverage required by the ACA. They tricked unsuspecting consumers into overpaying for worthless plans by making deceptive statements about the scope of the coverage that purchasers would receive.

Consumers have complained about fraudulent sales techniques employed by many other insurance companies and brokers that sell short-term health insurance policies. LifeShield, for example, advertises a consumer’s “freedom to choose any doctor or hospital.” Consumers who choose expensive hospitals find that the policy will only cover $1,000 of hospital bills per day. Coverage limits imposed by an Everest Reinsurance short-term policy left one consumer with unpaid medical bills of more than $244,000. Lawsuits against Health Insurance Innovations accuse the company of misleading consumers about the kind of insurance they were buying.

What Can Consumers Do?

Unfortunately, the FTC cannot respond to every complaint of short-term medical insurance fraud. Fortunately, consumers who have been deceived can pursue private remedies. Consumer fraud lawsuits allow individuals to fight back when they do not receive the comprehensive benefits that they were promised by deceptive insurance brokers and agents.

Consumers burdened by medical debt after their insurance claims are denied may be able to sue for insurance fraud, insurance broker fraud, negligent misrepresentation, or violations of state consumer protection laws. Lawyers specializing in insurance law and bad faith insurance claims can help victims of scam health insurance plans understand the remedies they are entitled to pursue.

Advocate Law Group has decades of experience representing individuals who have been harmed by the denial of their valid insurance claims. At no cost to you, we will provide a case assessment to help you evaluate the merits of your claim. Call today or click the button below for a free case review.