Protecting Your Coverage and Care: Cracking Down on Scam Health Insurance Plans

The Biden administration is taking huge strides to protect individuals and families in the U.S. by cracking down on insurance providers and brokers that purport to offer “affordable” coverage options but leave people high and dry when they need care. Over the past decade, Families USA has worked consistently to advocate for more federal oversight and stronger consumer protections as companies have systematically sought loopholes to avoid providing comprehensive care.

Let’s talk about Nate, who in 2018 had to quickly search for short-term health coverage after he was no longer able to be covered by his parents’ health insurance plan. Nate was working his first job out of college, needed coverage quickly, and ultimately selected a plan through MyBenefitsKeeper.¹ At 23- years-old, and relatively healthy, Nate didn’t think he would often need to rely on his insurance beyond the basics. But even that proved challenging, with a $150 per month premium, $75 copays for each of his doctor’s appointments, and non-covered prescriptions running him $300 a month. While on this plan, Nate experienced digestive problems that required surgery, leaving him with over $13,000 in medical debt that took four years to pay off.

“They nickel and dimed me. And I think the frustrating part for me was the lack of options but also the lack of protections. I think there are so many people who, like me, lose insurance without it being a major life event and end up with options that are almost worse than not having insurance. Because not only did they essentially cover nothing, I was also paying them to cover nothing.”

Consumers have been lied to, falsely marketed to, and misled by deceptive websites selling “junk” insurance plans that cost hundreds of dollars but offer low-quality coverage. How did this happen in the first place, what are the recent regulatory victories that turned the tide on this problem, and how do we work together to keep people covered and protected in the future?

To understand these landmark regulatory wins, we first must understand what a short-term plan is, and how it differs from an Affordable Care Act (ACA) compliant plan.

What’s the Plan?

In an attempt to get around ACA requirements to provide comprehensive insurance, there has been a concerted push from some insurance carriers to expand the availability of certain plans (often called “junk insurance”) that are supposed to exist in limited circumstances. These plans, including short-term, limited-duration and Association Health Plans (AHPs), are being offered as cheaper, flexible insurance options but in reality don’t provide the same protections and coverage as ACA compliant plans.

A short-term plan is typically used as an affordable bridge to prevent a total coverage lapse for those who are between jobs or transitioning from one health plan to another. While these plans can be useful for that purpose, they are intended to be a stopgap in between periods of long-term health insurance and not a replacement for high-quality insurance. Recently, the Department of Health and Human Services (HHS) finalized a federal rule, which will go into effect in September 2024, limiting short-term plans to a duration of three months.²

Association Health Plans (AHPs) offer group insurance to groups or associations of employers, to give their members better purchasing power. Under the guise of providing more options for coverage, and lowering coverage costs, a 2018 rule expanded the abilities of groups and associations to meet the definition of an “employer”, and therefore enabling them to offer health coverage with little oversight.³ This gave rise to more AHPs that are exempt from many important protections required of ACA compliant plans, and particularly left small employers and their employees without important protections.

Problems with the 2018 AHP rule included:

• No requirement to cover the 10 essential health benefits (EHBs) available to those in the ACA marketplaces and in other individual and small group health plans. These services include hospital care, prescription drugs, maternity care, and treatment of mental health and substance use disorders, among others.
• No restriction on premium costs, meaning AHPs could vary the price of premiums without any limits, based on factors such as area of residence (rural or city), age, and other associated health factors.
• No risk sharing with other health plans. This is in direct opposition to ACA plans, which spread the average risk level across the entire market. This allowed AHPs to move healthier beneficiaries into low-cost products, reducing premiums for them, but raising costs for everyone else.
• Invitation to fraud and insolvencies since it was very difficult for regulators to oversee AHPs and insist that they have enough money to pay claims.

Families USA has spent the last six years advocating for greater protections against junk plans, filing amicus briefs in the cases of State of NY et al. v US DOL and City of Columbus, et al. v. Donald J. Trump, and even generating a report that followed an AHP scam that impacted at least 10 states.^4,5,6,7 This year, we submitted comments to the Department of Labor on a proposed rule that would finally remove the 2018 rule that was harming beneficiaries. Health care advocates and families everywhere can finally breathe a sigh of relief as this new proposed rule went into effect in March of 2024, curbing short-term scam insurance plans.⁸

Along with systemic changes through rulemaking, the Biden administration is also seeking action against specific insurance carriers that provide insufficient plans. One such scam company is Benefytt Technologies, who operated under other names like MyBenefitsKeeper and AgileHealthInsurance, and offered short-term health junk insurance. These plans lacked key consumer protections and essential health benefits coverage, and tacked on a high price tag at the end of the day. In March 2024, the Federal Trade Commission (FTC) settled a lawsuit against Benefytt Technologies and its third-party partners, resulting in nearly $100 million in refunds that will be issued to 450,000 Benefytt payers.⁹

The Long and the Short of It

Now, let’s go back to Nate, who in 2024 received a settlement following the suit against Benefytt Technologies. At the time he had no idea he had purchased a junk plan; he was simply unhappy with his coverage and resulting medical debt. This is just one story out of thousands, one voice speaking out among the crowd. “I didn’t know what to do” Nate said, “And I know that many people wouldn’t know what to do in my situation. I hope that someone can read this story, and see that there is some recourse they can take, and places they can turn to for help.”

If you purchased a junk plan or were misled by a plan’s deceptive marketing, you can file a complaint with your state insurance department and report the scam to the Federal Trade Commission.¹⁰ For questions about whether plans offered through employers are legitimate, you can also contact the Department of Labor’s Employee Benefits Security Administration.¹¹

As the voice for health care consumers, Families USA is constantly working for you, advocating for you. If you or someone you know — your sister, your neighbor, your friend — experienced challenges with junk insurance plans, please tell us about it! By lifting up your story, you can help keep people covered and protected in the future.

Get involved and stay informed by subscribing to our Health Action Network newsletter.

Footnotes:
^1. https://familiesusa.org/stories/nate-keller/
^2. https://public-inspection.federalregister.gov/2024-06551.pdf
^3. https://familiesusa.org/resources/association-health-plan-rule-would-make-it-easier-to-sell-junk-insurance/
^4. https://familiesusa.org/resources/pushing-the-needle-forward-on-health-insurance-protections-and-fighting-junk-plans/
^5. https://affordablecareactlitigation.files.wordpress.com/2019/07/dcc-families-usa-amicus.pdf
^6. https://democracyforward.org/wp-content/uploads/2019/06/67-1-Families-USA-Amicus-Brief.pdf
^7. https://familiesusa.org/wp-content/uploads/2010/10/Scam-Insurance-Plans.pdf
^8. https://www.nytimes.com/2024/03/28/us/politics/biden-short-term-health-plans.html
^9. https://www.ftc.gov/enforcement/refunds/benefytt-technologies-refunds
^10. https://consumer.ftc.gov/articles/what-do-if-you-were-scammed
^11. https://www.dol.gov/agencies/ebsa/about-ebsa/ask-a-question/ask-ebsa