How to Protect Your Practice from Junk Health Insurance

In early 2024, after nearly 6 years of litigation, the Federal Trade Commission (FTC) obtained a $195 million judgment against Simple Health Plans LLC for selling sham healthcare plans to consumers. The purported “comprehensive” plans – which had claimed to cover pre-existing medical conditions, prescription drugs, primary and specialty care treatment, inpatient and emergency hospital care, surgical procedures, and medical and laboratory testing – instead acted more like medical discount plans.

Subscribers were left paying up to $500 per month in premiums for extremely limited benefits that often incurred thousands of dollars in uncovered medical bills, and often, little to no treatment.

Simple Health Plans LLC has now been banned from marketing, promoting, selling, or offering any healthcare products and must pay the $195 million judgment to the FTC to enable refunds to consumers. Further, the company must destroy any personal information collected from consumers. However, for the many consumers that were denied medical care, and for the healthcare providers who may never receive payment for services rendered, these reimbursements will be too little, too late.

Feds Fix Loopholes, Mandate Transparency

To prevent this type of situation from re-occurring, the Biden-Harris Administration is cracking down on “junk insurance” plans that mislead consumers into buying health plans that discriminate based on pre-existing conditions and provide little to no coverage for needed services.

In March 2024, the Departments of Health and Human Services, Labor, and the Treasury collectively released a final rule related to short-term, limited-duration insurance (STLDI) plans. These plans, which are designed to fill temporary gaps in coverage when a person is transitioning from one source of coverage to another, have been a known loophole for junk insurance plans. Since STLDI plans are not subject to the consumer protections found in the Patient Protection and Affordable Care Act (PPACA, aka Obamacare) – which prohibit discrimination based on preexisting conditions, health status, age, and gender – insurers could market these limited coverage plans as affordable options.

To fix this issue, these “short term” plans will now be limited to 4 months instead of the previous 3 years, making it much easier for consumers to understand that STLDIs are not long-term solutions for their healthcare needs.

STLDI plans, as well as fixed indemnity policies, will also be required to include a clear, easy-to-understand consumer notice on marketing, application, enrollment, and re-enrollment materials. The new transparency requirements will ensure that consumers are “more informed about the risks associated with these types of coverage and their options for comprehensive coverage,” noted CMS Administrator Chiquita Brooks-Lasure in a press release.

The new rules related to STLDI plans go into effect September 1, 2024, while the new rules related to fixed indemnity policies take effect January 1, 2025.

Old Scam with a New Name

Unfortunately, the Simple Health Plans story is not an isolated event, nor is it a new problem – and the new federal rules won’t automatically fix the longstanding issues that already exist.

As far back as 2010, the New Jersey Department of Banking and Insurance reported that the US Department of Health and Human Services (HHS) and the National Association of Insurance Commissioners (NAIC) had notified state insurance commissioners of national reports of deceptive sales representatives. These individuals were misrepresenting the then-new federal healthcare reforms that were going into effect due to the passage of the PPACA, attempting to sell fraudulent health insurance policies through door-to-door solicitations, toll-free telephone numbers, and other means.

The Ohio Attorney General’s Office reported similar findings in 2014, warning that unscrupulous insurance companies were using deceptive advertising to entice consumers to enroll in illegitimate insurance plans for “just pennies a day.” In response, the Ohio Attorney General urged consumers to contact the Ohio Department of Insurance to verify the legitimacy of insurance companies before signing an insurance application.

However, even before the passage of PPACA, Senator Chuck Grassley warned Congress in 2004 that fake health insurance was a growing problem. According to his Congressional testimony, the US Government Accountability Office (GAO) had found that more than 200,000 policyholders were affected by health insurance scams from 2000 to 2002.

Even with the new HHS rules aimed at removing STLDI loopholes and improving transparency, insurance scams and under-insurance are not likely to disappear. According to a report from more than 30 national patient organizations, including the Leukemia & Lymphoma Society, American Heart Association, and the United Way, patients are left under-insured by a number of “insurance-like” products – many of which are unaffected by these new rules.

While the organizations behind the report are supportive of the recent HHS rules to reduce the maximum duration of STLDI plans as one way to protect consumers, they also point to the many other types of plans that result in under-insurance of patients. These include healthcare sharing ministries, Farm Bureau plans, grandfathered plans, minimum essential coverage-only plans, ERISA plans, and more. The patient organizations are urging lawmakers to improve transparency requirements for all of these plans, to remove carve-outs for non-commercial plans (so that they must satisfy the same licensure and financial standards required of commercial plans), and to revise the federal definition of insurance to end the inappropriate sale, marketing, and development of insurance-like products that leave patients under-insured.

How to Avoid Junk Insurance Plans

While patients are the primary target of dishonest insurers selling junk plans, physicians and other healthcare providers also have skin in the game. When insurance doesn’t cover needed services, patients are often left with steep medical bills that they have no way of paying, leaving everyone from private practices to large health systems without their anticipated revenue.

As your patients’ most trusted healthcare advisor, you can help to arm them with vital information for avoiding insurance scams and choosing health plans that cover the services and treatments they’ll most need. Consider including information on spotting insurance scams and/or choosing the right insurance in your welcome packets for new patients or in your waiting room.

The FTC offers several tips on identifying insurance scams, including how to:

• Verify whether or not a marketed plan is legitimate. Medicare plans can be verified at Medicare.gov or 1-800-MEDICARE (1-800-633-4227), and Marketplace plans can be verified at HealthCare.gov or 1-800-318-2596.

• Know the difference between medical discount plans and insurance. Medical discount plans are not an equal substitute for insurance and often charge people monthly fees for very little medical coverage in return. Consumers should be advised to confirm the exact discount details, obtain written information on the plan prior to enrolling, and check with their state’s insurance commissioner’s office to confirm that the medical discount program is licensed.

• Never accept vague answers. It is a huge red flag if a salesperson refuses to divulge important details about coverage, including deductibles, co-pays, in-network providers, etc. Legitimate plan representatives should be able to answer your questions in detail without referring to their website or a brochure.

• Report Scams. If your practice or your patient identifies a scam, it can be reported to the Federal Trade Commission and to your state attorney general.

To provide consumers with easy-to-understand information, the American Cancer Society has prepared a printable information sheet on health insurance scams that can be easily shared with patients. The document provides further detail on identifying red flags and key questions to ask.