US Federal Class-action Lawsuit against "Junk" Flimsy Health Plans!
Original: June 26, 2019; July 02, 2019;
In a class-action lawsuit filed against Health Insurance Innovations in Tampa, Fla., more than 500,000 beneficiaries accuse the insurance company of mis-representing its health insurance plans sold. Though marketed as ACA-compliant healthcare insurance plans with guaranteed coverage, the plans sold were less comprehensive in coverage - a gap large enough to keep policyholders with large medical debt (unpaid medical bills). Such lawsuits underscore the deficiencies of these types of cheaper health insurance options, promoted by the Trump administration but heavily condemned by the likes of the Association for Community Affiliated Plans and the National Alliance on Mental Illness.
In such cases, the customers have no prior knowledge about the marginal quality of the health insurance products purchased. Instead, the insurance brokers marketed their products as ACA policies, part of "an array of traditional health plans." One of the plaintiffs was sold a limited benefit plan with limited reimbursement in 2016, purported to fit the consumer's budget. The other plaintiff was sold a health insurance plan in 2018, purported to be the "best plan in Kansas at the best price" to cover invasive ductal carcinoma (a type of breast cancer). In the meantime, the Health Insurance Innovations proclaims its innocence, "vigorously defend ... against all such allegations." It considers its products of short-term plans as affordable options to the more traditional, but more expensive, ACA-compliant plans. The company with total sales of $352 million last year specializes in the online sales of those "skimpy" insurance policies that do not necessarily meet the ACA coverage requirements.
Such "junk" insurance plans are "largely" prohibited in four states - California, Massachusetts, New Jersey, and New York. Other states have restricted a number of these plans' provisions. For example, the state of Pennsylvania had filed lawsuit against eight companies for misleading their customers. These state initiatives should be considered within the larger scope of the Congress increased concerns about medical debt and its crushing load on patients' financial and emotional wellness. These federal and state initiatives are further supported by a recent Georgetown University's Center on Health Insurance Reforms findings that patients are "at greater risk of being under-insured with large financial liability" during times of high-cost medical bills.
Health Insurance Innovations is accused of subcontracting with Simple Health to promote and sell those "junk" skimpy products as P.P.O traditional plans with doctor and hospital coverage of their choice. The lawsuit also points to the company's false marketing online campaigns which list their insurance plans as brand-name policies. Further underscoring the validity of the lawsuit are accusations the insurance company was involved also in the development of the scripts used by Simple Health brokers - scripts that greatly exaggerate the merits of their insurance plans.
Health Insurance Innovations insist that Simple Health was the third-administrator of the plan, responsible for selling its insurance policies and for collecting premium payments. HII accused SH of violating the trust of its customers and its regulators; its brokers were required at all times to provide clear disclosure about its policies. Early court findings show that Simple Health is the main culprit - clearly indicted as the key defendant in the FTC case. SH was recently shut down by the Federal Trade Commission for using the "classic bait and switch" scheme to sell its products. Ironically, HII has recently settled with state regulators over its market practices while denying any wrongdoing.
In a related note, the Trump DHHS has recently finalized regulations to expand "health-care choices" for individuals with limited insurance options. By expanding "health reimbursement arrangements (a.k.a, HRAs), employers could afford their workers "tax-exempt dollars" to purchase their health insurance plans from the individual market. Limited by the Obama Administration Affordable Care Act, such arrangements are to extend the favored healthcare tax advantages of employers also to employees. Rather than selecting the "better route" by eliminating the employer tax exclusion, the Republicans chose the latter, as this fits best with the Trump Administration to repeal and replace Obamacare.
According to the Trump Administration, some 800,000 employers will benefit from such regulations, extending healthcare insurance coverage to more than 11 million workers and their families. In other words, some 11 million uninsured workers (and families) would become insured over time.
The main beneficiaries of such arrangements are the small businesses and their employees. For companies, such Health Reimbursement Arrangements or HRAs are attractive as they can compete for young or healthy workers, with little need for medical services. According to the Trump Administration, about 30% of workers (at firms with three to 24 employees) are insured, down from 44% in 2010. Thus, such regulations could help small businesses (lack the economies of scale) to provide health insurance benefits to their workers.
For healthcare exchange markets, such regulations are beneficial. Employees of little need of medical services will more likely get their medical coverage through individual health care insurance plans. This could, in turn, improve the diversity of the individual market risk pool. The rules prevent double dipping into both an employer-based reimbursement and an Obamacare tax-credit subsidy.
For workers, such arrangements are best for workers who "earn too much to qualify" for subsidies (from the individual market's high premiums) under the ACA program. It is also favored by workers who are "too few in numbers to afford" group health care insurance plans. In such case, the risk pool is too small for a law firm with 20 employees to afford employer-based health insurance plans. Such regulations might afford small businesses the opportunity to provide healthcare benefits to their employees, similarly to large companies which can afford "bidding up benefits" to retain their workers.
Key Concerns: The first concern is employers might switch their sick workers onto the exchanges. The second concern is companies might cancel out their health plans to dump their sick workforce onto the individual market. Fortunately, there are a few controls to prevent such concerns. For the latter, studies have shown companies with sick workforces are more likely to favor broad provider networks, key features of group health insurance markets. For the former, companies cannot "cherry picking." In such case, employers cannot prefer some employees over others for reimbursement.
References:
Abelson, Reed. (2019, June 13). Florida Company Is Sued Over Flimsy Health Plans. NY Times, p. B1, B5 - https://www.nytimes.com/2019/06/12/health/insurance-lawsuit-obamacare.html
Opinion. (2019, July 2). Review & Outlook: Trump's Healthy Tax Break - an expansion of health reimbursement accounts is good news for workers. WSJ, p. A14
Supplement Readings:
‘Short Term’ Health Insurance? Up to 3 Years Under New Trump Policy - Aug. 1, 2018
House Democrats to Unveil Plan to Expand Health Coverage - March 25, 2019
Without Obamacare Mandate, ‘You Open the Floodgates’ for Skimpy Health Plans - Nov. 30, 2017
In Clash Over Health Bill, a Growing Fear of ‘Junk Insurance’ - July 15, 2017
About That 'Junk' Health Insurance - WSJ - https://www.wsj.com ? Opinion ? Review & Outlook
California lawmakers move against 'junk' health insurance | CALmatters - htttps://calmatters.org/...california/california-lawmakers-move-against-junk-health-insu...
How to spot a junk health insurance plan | Policygenius - https://www.policygenius.com/blog/how-to-spot-a-junk-health-insurance-plan/
Trump's “junk” health care plans threaten people with mental illnesses ... https://www.salon.com/.../trumps-junk-health-care-plans-threaten-people-with-mental-...
Trump Officials Promote Junk Health Insurance Over Obamacare - https://nymag.com/daily/.../trump-officials-promote-junk-health-insurance-over-obamacare.ht...
'Junk insurance' is yet another blow to small businesses | TheHill - https://thehill.com/.../healthcare/412224-junk-insurance-is-yet-another-blow-to-small-...
Judge blocks Trump's rule to expand insurance plans that don't meet ... https://www.rollcall.com/.../judge-blocks-trumps-rule-expand-insurance-plans-dont-m...
Junk health insurance - Consumer Reports - https://www.consumerreports.org/cro/magazine/.../junk-health-insurance/index.htm
States sue Trump administration over association health plans - Politico - https://www.politico.com/.../states-sue-trump-administration-over-association-health-pl...
Preexisting conditions: What will new health insurance plans cover ... https://www.charlotteobserver.com/opinion/article219543875.html
Sarah Rentz: Why insurance coverage of pre-existing medical ... https://www.mcall.com/.../mc-preexisitng-conditions-repeal-rentz-0629-20180628-sto...
Mitch Harle, Author at Protect Our Care - https://www.protectourcare.org/author/mharle/
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