Misleading Marketing and Sales of Full Coverage Short-Term Health Plans Lead to Lawsuits

Buyers of short-term limited duration health insurance policies (STLDI) who enrolled in the plan aggressively pitched as ACA-compliant when the plans actually did not comply are finding the policies do not deliver what was promised in benefits and coverage and sidestepped many protections under the ACA, leaving them uninsured with crushing medical and hospital bills.

Exempted from many of the same levels of coverage of the ACA, short-term limited duration health insurance was originally offered as stop-gap insurance to individuals who were between jobs that offered employer-provided insurance plans, or for those coming off their parent’s insurance plans.  Pitched attractively at a lower price point than standard health plans, the policies provide coverage for only three months and are nonrenewable. (The Trump administration in 2018 eliminated these restrictions and allowed insurers to sell and market short-term plans effective for 12 months, with the option to renew or extend the coverage for up to 36 months.)

The obvious appeal of the STLDI product to buyers is its relatively low premium, but there is a “hidden” element—found in what the plan actually covers. Since it does not have to comply with the ACA rules, an STLDI policy did not have to cover preexisting conditions, preventive care, pregnancy and newborn care, treatment for mental health conditions or substance abuse. Some plans have a higher deductible than the ACA-complaint policy or imposed annual and lifetime coverage limits, a practice prohibited by the ACA. 

The Urban Institute, an independent research firm based in Washington, DC, voiced its concern over coverage in its report in January 2019, finding that many buyers believed they were buying policies as a low-cost alternative to Obamacare, but with all its protections and benefits. In actuality, only after claims were rejected did consumers realize that their plans did not deliver on what was promised. According to the Urban Institute, 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.”

Buyers who were led to believe they had purchased comprehensive health insurance found themselves uninsured when claims for payment of hospital and medical bills were denied, sometimes followed by cancellation of coverage, leaving them saddled with months of sky-high medical bills that they assumed would be covered by the purported health insurance they had obtained.

Some plans fail to cover pre-existing conditions that were undiagnosed at the time coverage was purchased by the buyer.  For example, one insurer, HHC Life, refused to pay for a patient’s triple bypass heart surgery when it decided that his heart problem was linked to undiagnosed conditions.  The patient was left with a $900,000 in medical bills. The Center on Budget and Policy Priorities, a nonpartisan research and policy organization, cited a similar case in which a Georgia woman diagnosed with breast cancer was left with $400,000 in medical bills for a condition she was unaware of when she purchased the policy. A NY Times article reported:  “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.”

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”.

Misleading marketing by Simple Health Plans

According to the FTC, one of the most egregious offenders, Florida-based Simple Health Plans, “lured consumers through a network of deceptive lead generation websites that claimed to provide information about comprehensive health insurance. On the sites, the defendants falsely held themselves out as experts on and providers of government-sponsored health insurance policies, such as those offered under Medicare and the Affordable Care Act. In many cases, the sites also misleadingly featured the logos of the AARP or well-known insurance carriers, such as Blue Cross Blue Shield plans, when in fact the defendants were not affiliated with such entities.” The company hired telemarketers who falsely claimed to be licensed insurance agents.

A judge agreed with the FTC that Simple Health Plans and its affiliates fraudulently marketed “limited benefit plans” and membership in medical discount programs as if they were major medical coverage. The judge concluded that the companies misled consumers who believed they were buying comprehensive insurance that would cover pre-existing medical conditions, prescription drugs, and full medical care.

While the judge entered a temporary restraining order that put a halt to the operations of Simple Health Plans and its associated companies, experts are convinced that similar fraudulent insurance schemes are widespread. North Dakota’s Insurance Commissioner recently warned that there are “many bad actors that are looking to take advantage of consumers as they explore their health insurance options.”

What You Can Do if You Have Been a Victim of Misleading Insurance Information

The unscrupulous health insurers have been extremely creative in pitching short-term health insurance, promising or implying that buyers would receive comprehensive coverage that was fully complaint with the Affordable Care Act. If you were a victim of a short-term health plan promised by brokers or agents to provide “full coverage” and are now left with no health insurance and burden by medical debt after your insurance claim is denied, you may be able to sue for insurance fraud, insurance broker fraud, negligent misrepresentation, or violations of state consumer protect laws.

Self-representation in insurance fraud cases, however, is not advised. Truthfully, no matter how brilliant or educated you are, the insurance lawyers are far more experienced in assessing your case and in dealing with the many issues that may come up.  Retaining your own counsel with experience in the courthouse levels the playing field.