Risky Business: Buying health insurance in the new age of deregulation - Houston Chronicle

Robert Williams was getting a haircut and mentioned to his barber he would soon need to buy health insurance. As it happened, the barber had just bought a new, low-cost plan and promised to have his agent call.

Within moments, Williams’ cellphone rang, before he even left the shop. “I hear you need health insurance,” the agent began.

“Well, yes, I do,” a startled Williams, 63, replied. Then came the pitch, fast and hard.

The agent, contracted by a subsidiary of Texas insurer US Health Group, promised a plan cheaper and better than those offered through the Affordable Care Act. But he omitted that the coverage could be spotty, Williams said, adding that the agent seemed to just want to close the deal.

“Let’s do it right now,” Williams said he was told. “We need to sign you up today.”

Those kind of sales calls are only expected to increase, health policy policy experts warn, now that the guardrails designed to protect unsuspecting consumers from limited health plans and the insurers and agents who push them have come down. Under the Trump administration, significant portions of the individual insurance market have been deregulated and rules governing the federal health care law known as Obamacare rolled back.

The goal is to deliver on an administration promise of lower premiums and greater choice. The trade-off, though, is a return to a past when polices came with restrictions and exemptions tucked inside, limiting coverage for pre-existing conditions, prescription drugs, hospitalization and preventative care.

While the full impact of dismantling prior rules is unknown, the Centers for Medicare and Medicaid predicted the number of people buying just one type of newly deregulated plans will rise from 86,000 last year to 1.6 million by 2022. Regulators and consumer advocates worry that unsuspecting buyers could be vulnerable to staggering medical bills because the coverage they were sold is insufficient.

“We shouldn’t have an insurance market where consumers can accidentally go bankrupt,” said Stacey Pogue, a health policy analyst for the Center for Public Policy Priorities. “We have been telling people for years they didn’t have to worry anymore, that there are no loopholes, no fine print. It’s just not true anymore.”

Further, because these plans operate outside the rules of the Affordable Care Act, insurance companies backing them can spend less on customer medical claims and pocket a bigger share of premiums for overhead and profit.

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An analysis of recent financial filings by the Houston Chronicle found insurance companies selling plans that don’t comply with ACA rules are spending only about 40 cents of every dollar collected in premiums on customer’s medical claims. ACA-compliant plans require insurers spend about 80 percent of premiums for policy holders’ care.

Companies selling non-compliant plans, meanwhile, have ramped up telemarketing operations and offered hefty commissions as incentives to enroll as many customers as possible. As a result, Pennsylvania Insurance Commissioner Jessica Altman told Congress earlier this year, many consumers are getting misled.

“There’s definitely a business strategy,” Altman said. “There has been a shift in what companies feel they can do.”

‘No, no, no’

Williams said the agent, Michael McManus, asked for an over-the-phone deposit of $449 — one month’s premium payment plus a $100 registration fee — before outlining plan specifics. Williams said he put McManus off by saying he did not have the money in his account.

McManus strongly disputes that version.“That’s not true. We don’t do that,” he said, adding that Williams perhaps misheard or misunderstood that he was only seeking a face-to-face meeting.

The two men met about a week later at a coffee shop. Williams said he was told he could enroll immediately, see any doctor he wanted and have no co-pay or deductible. His treatments for a pre-existing pinched nerve would probably not be covered by the plan that McManus proposed, but his chronic asthma would.

The agent said he went “line-by line” over the coverage with Williams, who seemed pleased and turned over his bank information for automatic monthly payments. Williams, though, said he was confused by the jargon and enrolled only on the condition that he get a written policy in the mail to further study it.

A 32-page booklet arrived from a company called American Business Coalition. Included was a gift card to Office Depot. Not until page 13 did this caveat appear: “The coverage under the blanket group specified disease/illness and accident insurance policies does not provide major medical insurance coverage.”

On page 20, it said, “There is a 12-month pre-existing condition waiting period for hospital confinement and surgery relating to a pre-existing condition.” Elsewhere, the booklet listed exempted conditions including maternity, autism, and mental health treatment. It also would not pay for many prescription drugs or emergency allergy kits.

“No, no, no,” Williams shouted. He immediately called McManus to cancel.

McManus, who has been an agent for just more than two years, canceled the plan but said he was surprised by Williams’ reaction because his other clients are happy. He speculated Williams must not have understood what he was buying.

The policy was a limited benefit indemnity plan that offers lump sum payments for specific illnesses and treatments, but not comprehensive coverage. For instance, it paid $75 per doctor visit, but only allowed three a year.

The plan paid $500 for chemotherapy per day with a maximum annual pay-out of $10,000. Yet the average initial cost of one chemotherapy treatment can reach as high as $7,000, with an eight week course running as high as $30,000, according to cancer experts. For dire conditions such a terminal illnesses and organ transplants, the plan would make one-time payments of $9,000.

Indemnity plans, which have been around for decades and operate outside the rules of the ACA, are typically sold as supplements to full coverage. They are less expensive because they cover less. But insurance experts say they are not traditional health insurance and should never be marketed as such.

Tough luck

McManus is a licensed agent contracted by US Health Advisors, the marketing arm of US Health Group, a Fort Worth company that “offers a broad portfolio of health-related coverage options,” a spokeswoman said in a statement. US Health Group is one of the largest suppliers of non-compliant ACA plans in Texas, McManus said.

US Health Group owns Freedom Life Insurance Co. of America, which underwrites Texas plans. Freedom Life also underwrites American Business Coalition plans, according to Williams’ membership paperwork.

Last year, Freedom Life reported $37 million in profit, nearly double the previous year, according to financial filings with the National Association of Insurance Commissioners. It paid out about 44 cents of every dollar it collected from plan members, compared to about 47 cents in 2017.

In August, UnitedHealthcare, the nation’s largest insurer, bought US Health Group for an undisclosed sum, adding to the larger company’s portfolio of products that do not comply with the ACA.

UnitedHealthcare also owns Golden Rule Insurance Company, a leader in the nation’s short-term plan market. Last year Golden Rule spent just 37 cents on medical claims for every dollar collected in premiums, dropping from about 50 cents on the dollar two years before, according to financial filings.

UnitedHealthcare said in a statement that its plans “comply with all state requirements and with the current federal requirements.” Since its plans are cheaper, the company said, it must take a larger share of premiums to cover fixed costs.

Short-term plans often use a practice called medical underwriting in which customer health status — past and present — determines coverage limits and price. The ACA prohibits medical underwriting.

The Obama administration restricted short-term plans to three months without renewal. As a further step to limit sales of these and other limited plans, the health law imposed a tax penalty on most consumers who did not have comprehensive coverage. A Republican-led Congress repealed that penalty two years ago.

More recently, President Donald Trump extended short-term plans to a year, allowing for extensions up to three years and keeping medical underwriting in place. The White House has vigorously defended deregulation of the insurance industry as consumer and taxpayer friendly. A policy paper by the Council of Economic Advisers earlier this year said the elimination of restrictions would “generate benefits to Americans that are worth an estimated $450 billion over the next 10 years.”

But that paper also acknowledged a pitfall: “Some consumers who choose not to have ACA-compliant coverage might have higher healthcare expenditures than they expected and also lack coverage,” the paper said, “This would not necessarily mean that these consumers were unwise in their choice of insurance, they were simply unfortunate.”

SEO friendly

When shopping for individual health coverage, people often turn to the internet. That’s where trouble can start.

During open enrollment periods, plugging key words into a search engine — such as “Obamacare plans” or “ACA enroll” — will return plenty of results. But fewer than one in five of the 256 search results and 65 websites analyzed by Georgetown University Health Policy Institute researchers took consumers to plans that comply with the health care law.

Some web addresses have names such as “Obamacare-plan.com” or the potentially misleading, “healthcare.com,” rather than “healthcare.gov.,” said Dania Palanker, assistant research professor at Georgetown’s Center for Health Insurance Reforms, who suspects the confusion is intentional.

Under Texas law, it is illegal for an insurer or agent to “misrepresent the true nature of the policy or class of policies.” Violation could lead to fines or revocation of a license.

“You are put through a labyrinth of sites where each site would take you to another site that would eventually ask for your phone number,” Palanker said, “And then the phone calls start.”

Dialing for dollars

Kathy Connor used to make cold calls for US Health Advisors. Armed with her cellphone, a list of company-purchased leads, and a script, she said she was told to make between 100 to 200 calls per day for US Health Group products. Most days, she said, she hit her goal.

At 59, she was an out-of-work widow with a disabled daughter. A friend suggested she try selling insurance. She took a two-day course and studied for two months for the state licensing exam, which she passed in late 2015. Soon after, she was hired by US Health Advisors.

“They were looking for people who just got their license. I was brand new,” said Connor, who lives in the Dallas area. The lure was a promise of a six-figure salary her first year. Instead she said she cleared about $10,000 in 2016.

Her script would begin: “A lot of people feel like they are paying too much for their health insurance. Do you currently have coverage?”

If the answer was “yes” she would suggest they switch to “save money and possibly get better benefits.” If “no”, she would move to a series of “survey questions” such as age, height and weight, tobacco use, and pre-existing conditions. Even if they liked their plan, she was to press them anyway.

“Wow! I actually found someone who is happy, that’s great but you might be able to pay less and get better coverage,” the script said.

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Connor quit in August 2017 and last year filed a complaint with the Texas Attorney General’s Office alleging deceptive sales practices and pay structure. The status of that complaint is unclear.

US Health Group referred requests for comment to UnitedHealthcare. A spokeswoman for United Healthcare defended US Health Group’s sales practices, saying agents go through “rigorous training and certification requirements before any product is presented.” She added that agent calls are monitored to ensure accuracy and that they disclose plan limitations.

If a customer is unhappy with a plan, they can cancel for a refund within 30 days, the spokeswoman said..

But when customers canceled, Connor said, agents have to pay back commissions that start at about 15 percent and rise to as much as 70 percent for add-on coverage. One week, when five clients canceled, she burst into tears.

Her supervisor told her to not to worry, Connor recalled. “She said, just keep smiling and dialing.”

jenny.deam@chron.com

@jenny_deam

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