Promotion for Short-Term Health Plans, but State Regulators Aren’t Buying It

BOSTON — The Trump administration’s efforts to allow health insurers to market short-term medical plans as a cheap alternative to the Affordable Care Act are already running into headwinds, with state insurance regulators resisting the sales and state governments moving to restrict them.

State insurance regulators, gathered over the past three days for a meeting of the National Association of Insurance Commissioners, expressed deep concern that short-term plans were being aggressively marketed in ways likely to mislead consumers. Many said the plans, which need not comply with the Affordable Care Act’s coverage mandates, were a poor substitute for comprehensive insurance.

“These are substandard products,” sold on the premise that “junk insurance is better than nothing” for people who cannot afford comprehensive coverage, Troy Oechsner, a deputy superintendent at the New York Department of Financial Services, told the insurers.

Jessica Altman, insurance commissioner of Pennsylvania, said she was “extremely concerned that some insurance agents or insurer websites may try to market short-term policies as comparable to ACA plans.” In the past two years, she said, she has revoked the licenses of eight agents and brokers “because of deceptive marketing of these plans.”

The top insurance regulator in New York, Maria T. Vullo, superintendent of financial services, said short-term plans were banned in the state. “We don’t want any confusion” between short-term plans and comprehensive insurance, she said.

The views of state officials are significant because states have the power to restrict or ban short-term policies, and state officials receive complaints when consumers are stuck with medical bills they thought would be covered by their insurance.

Already, some state governments are taking action against the policies that the Trump administration wants to promote. A rule issued last week by the Trump administration greatly increased the maximum duration of such plans, which had been three months. The new limit is 364 days, or a total of three years with renewals and extensions, making them more like a longer-term alternative to regulated, comprehensive insurance policies.

In Maryland, Gov. Larry Hogan, a Republican, signed a bill that limits short-term policies to less than three months and says they cannot be extended or renewed.

In Vermont, a similar law, signed by Gov. Phil Scott, also a Republican, limits short-term plans to three months or less and prohibits renewals. Rates and advertising are subject to approval by the state insurance commissioner.

A new Hawaii law sets a three-month limit on short-term plans and generally prohibits insurers from selling them to anyone who was eligible to buy comprehensive insurance through the Affordable Care Act marketplace in the prior year.

The Virginia legislature passed a bill authorizing insurers to sell short-term plans lasting up to 364 days, but Gov. Ralph Northam, a Democrat, vetoed it.

“People with minimal current health care needs are more likely to purchase these skimpy plans, leaving people who have more significant health care needs” to face higher premiums in the marketplace, Northam said.

The administration is standing by its push. William Brady, an associate deputy secretary at the federal Department of Health and Human Services, told state officials here that the new short-term plans could be “a great option for many Americans who were shut out of the insurance market by Obamacare’s high premiums.” He said that up to 2 million people were expected to enroll in the new plans at prices 50 to 80 percent lower than those of “Obamacare policies.”

But that discount comes at a price. Short-term plans do not have to cover prescription drugs, maternity care, mental health services or pre-existing conditions, which must be covered by Affordable Care Act plans.

“I have questions about the underlying value of these products,” Dave Jones, California insurance commissioner, said after listening to an upbeat discussion of short-term plans by several insurance executives. While two of the insurance executives were speaking, Jones inspected their websites on a laptop computer and said he could not find even basic information about the benefits and limitations of the policies. A bill passed by the California Senate and pending in the Assembly would bar the sale of short-term plans in the state.

Even officials from more conservative states expressed concerns. Bruce R. Ramge, director of the Nebraska Insurance Department, said the market in his state could benefit from short-term plans. But, he added, “I do have concern about some marketing techniques that get out of control.”

In some cases, he said, there is “inappropriate telemarketing with spoofed phone numbers,” and when a consumer starts asking questions, the caller hangs up.

Pennsylvania officials have seen similar problems. The state Insurance Department found, for example, that an agent had “misrepresented the benefits of short-term health insurance policies” and failed to advise customers that the policies did not cover pre-existing medical conditions. Marketing materials for one plan suggested inaccurately that it covered mental health care, Altman said.

Most state officials who spoke at the conference “were not interested in having short-term products in their states, and that is unfortunate,” said Jan Dubauskas, a lawyer at the Independence Holding Co., which is known as IHC Group and is one of the largest sellers of short-term insurance.

Several states have cautioned consumers about short-term plans.

Lori Wing-Heier, director of the Alaska Insurance Division, received complaints from consumers in 2015 about telephone solicitations by a Florida company offering short-term plans. At the time, she said, the company, Health Insurance Innovations, and agents selling its products were not licensed in Alaska. Insurance executives tried to reassure regulators. Gavin Southwell, chief executive and president of Health Insurance Innovations since 2016, told commissioners on Sunday that “we have invested tens of millions of dollars to ensure that consumers” receive good service and accurate information.

The company said last year that it had retained former Sen. Ben Nelson, D-Neb., a former chief executive of the National Association of Insurance Commissioners, to provide advice on compliance.

Dubauskas said her company, IHC Group, terminated two agents last week because it was dissatisfied with their marketing practices.