Without Obamacare Mandate, ‘You Open the Floodgates’ for Skimpy Health Plans


While repeal supporters argue that people would benefit by having the choice to buy less expensive plans, state regulators have been cracking down on rogue agents who have misled customers about what such inexpensive plans cover or more important don’t.

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Examples abound of people who are dumped from such policies or denied coverage, mired in debt and medical bills totaling thousands, if not hundreds of thousands of dollars.

One case pending in federal court involves Kevin Conroy, who had a heart attack in 2014 and underwent triple bypass surgery, just two months after his wife, Linda, obtained a short-term policy over the telephone.

Their insurer, HHC Life, refused to pay the bills.

“We freaked out,” Ms. Conroy said. “What were we going to do? It was $900,000.”

The insurer informed the Conroys the policy was “rescinded,” to use the industry jargon. After poring through his medical records, HCC claimed Mr. Conroy failed to disclose he suffered from alcoholism and degenerative disc disease, conditions he said were never diagnosed. “When one thing didn’t work, they went to another,” Mr. Conroy said.

HCC Life, a unit of Tokio Marine HCC, says it will defend its case. The company is also the subject of a multistate review by insurance regulators to see if it engaged in unfair or deceptive acts. It says it has fully cooperated. HCC Life stopped selling short-term policies last May.

A major player in this area is UnitedHealth Group, which abandoned the Affordable Care Act market after incurring sizable losses. United offers short-term plans through its Golden Rule unit. Before the federal law, Golden Rule was among those insurers criticized for rescinding policies. The company recently told investors it was excited by the president’s executive order because that would mean an increase in business for these plans.

Last year, a short-term policy averaged $109 a month for an individual, according to a recent analysis by eHealth, an online broker, compared with $378 a month during last year’s open enrollment period for an A.C.A. plan.

The policies are particularly attractive to the millions of people who don’t qualify for federal subsidies; only about half of the 17 million people buying coverage are subsidized, according to the Congressional Budget Office. Another target audience would be the 28 million who are uninsured. And some brokers are deliberately promoting the policies without pointing out they do not meet the same levels of coverage of A.C.A. plans, said Scott Flanders, the chief executive of eHealth. “They’re selling the hell out of it,” he said.

Jeff Smedsrud, a founder of Healthcare.com, an online insurance shopping site, “There are companies that aggressively, and some very aggressively, market it as a panacea.”

In recent years, state regulators have investigated the marketing practices of particular brokers, and consumers have sued to expose the actions of some bad actors.

In Pennsylvania during the past two years, the state took action against seven agents for misrepresenting the plans they sold. One woman who had a stroke was left with $250,000 in unpaid medical bills because the policy did not cover prescription drugs and other basic treatment.

While a handful of states, including New Jersey, now effectively ban short-term plans, others review rates and make sure the policies follow state law, said Dania Palanker, an assistant research professor at Georgetown University.

But other states will likely do little to prevent more sales of these policies, said Katherine Hempstead, a policy expert at the Robert Wood Johnson Foundation. “You’re going to make it easier in places where it is already easy,” she said.

Industry experts estimate as many as a million people may now have these policies, though the official tally is much lower. And others may fall under this umbrella, because it’s hard to distinguish from alternatives, like so-called limited benefit plans, which cap how much the insurer will pay, and association plans, available to small businesses, that will also be expanded under Mr. Trump’s executive order.

Several companies are poised to capitalize on a less restrictive environment. Health Insurance Innovations, which markets short-term policies, including those once offered by HCC Life, is under scrutiny by state insurance regulators. It recently told investors that there were “tens of millions” of people who could benefit from these plans. The company declined to comment.

These plans typically offer much higher commissions to brokers selling them, and they can be much more profitable for insurers. UnitedHealth’s Golden Rule spent about half of every dollar it took in premiums for medical expenses, according to regulatory filings. Under the federal law, insurers must spend at least 80 cents of each dollar on care for their customers. UnitedHealth declined to comment.

Some experts speculate that insurers are likely to exploit the existing A.C.A. market as a way of selling short-term policies to people until they have serious medical conditions. Coverage sold under the federal law would become increasingly expensive, with people priced out of the market if they didn’t get subsidies, Mr. Laszewski, the industry consultant, said.

While the market for subsidized coverage is largely protected, the market for those who pay the full cost is already shrinking, he said.

Like the insurance that was sold before the federal health care law, people with chronic conditions or a history of illness are mostly turned away. Companies will sometimes rescind policies if an individual has high medical bills.

UnitedHealth’s Golden Rule recently won a lawsuit involving one of its short-term policies, claiming it did not have to cover $400,000 in medical bills because it said a woman with breast cancer had an abnormal mammogram before she enrolled. The case is being appealed.

“Insurance companies today are interpreting their short-term health insurance policies so as to label any condition that arises during the policy term as a pre-existing condition for which the company can exclude coverage,” said a lawyer representing Ms. Jones in a statement. UnitedHealth declined to comment.

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Kevin and Linda Conroy had a short-term health plan, but after he had a heart attack, their insurer refused to pay $900,000 in bills. Grace Wood’s insurer also balked, but she appealed to regulators and the company relented.

Credit
Christie Hemm Klok for The New York Times

Customers often have had to argue about whether something was a pre-existing condition. When Karen Campbell and her husband looked for insurance before Obamacare, “we had this extensive, unbelievable interview, each of us about our medical history,” she said. After rupturing her Achilles’ tendon, which required $30,000 in surgery and physical therapy, the insurer asked for medical records to make sure it wasn’t something she previously had. “They just made it really difficult,” Ms. Campbell said.

Grace Wood, an instructor at a university in San Francisco, bought a short-term plan in 2013. When she had to have a heart procedure, her insurer, HCC Life, balked, leaving her with roughly $150,000 in unpaid medical bills.

“Why should I go bankrupt?” Ms. Wood recalled asking herself. It took her a year and a half, but she appealed and turned to regulators when the insurer ignored her. HCC eventually paid the claims.

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