By Karin Hicks, J.D.
The limited review suggests that some health insurance agents engage in deceptive sales practices when selling to individuals with pre-existing conditions.
The Government Accountability Office (GAO) conducted a review at the request of members of the U.S. Senate to obtain information on the sales practices of insurance sales representatives selling insurance plans that are exempt from Patient Protection and Affordable Care Act (ACA). The exempt plans do not have to comply with some or all of the ACA’s requirements and are less expensive than ACA compliant plans, though coverage is often more limited. This report details the 31 covert tests, or undercover phone calls, conducted in which the reviewers called selected health insurance brokers posing as individuals with pre-existing conditions in need of insurance. Of the 31 agents contacted, 21 of the agents appropriately referred reviewers to ACA-compliant plans and 8 agents engaged in deceptive sales practices (GAO Report, GAO-20-634R, August 24, 2020).
ACA-exempt Health Insurance. The individual health insurance market offers private plans sold directly to American consumers who do not have access to group coverage. Some of these health care plans do not have to comply with some or all of the requirements put into place by the ACA in 2014. The exempt plans may be less expensive, but they also offer more limited benefits compared to ACA-compliant plans. One type of plan, short-term, limited-duration insurance (STLDI), was designed to fill in gaps in coverage and is not subject to the ACA’s requirements for the individual market. Limited benefit plans and health care sharing ministries are other types of plans often exempted from ACA requirements.
An increase in use of ACA-exempt health coverage arrangements is expected in the future due to changes in federal regulation and the changing economy due to Covid-19. It is expected that ACA-exempt plans will become more attractive to consumers as they find it difficult to afford ACA-compliant plans. The significant downside to this is that the ACA-exempt plans could present risks for consumers who believe that coverage under the new plan will be comprehensive. Some states have relayed their concerns that insurance agents will try to sell ACA-exempt health insurance to consumers who are not suited to the plan, like those with pre-existing conditions.
Deceptive practices. The reviewers sought to determine whether sales representatives engaged in potentially deceptive practices when selling plans to consumers with pre-existing conditions. The definition of "deceptive practices" utilized in the review was taken from the Federal Trade Commission’s (FTC) Policy Statement on Deceptionas involving a material representation, omission or practice that is likely to mislead a consumer acting reasonably in the circumstances. In this instance, a misleading statement might include statements from a sales representative indicating that a plan covered a pre-existing condition. An omission, in this scenario, could be instances in which a sales representative fails to disclose that a plan offered would not cover the specified pre-existing condition.
Covert review. Reviewers called insurance sales representatives in five states selected for geographic and population-size variation during the period October 2019 to August 2020. The reviewers performed web searches for terms, such as "affordable health insurance", and selected health insurance providers to contact from that search. Approximately half of the tests were performed during the 2020 Open Enrollment Period (OEP), and the remaining tests were done outside of the OEP.
Results. The covert tests yielded a wide range of results. Specifically, in 21 of the 31 tests, the sales representative appropriately referred the reviewer to an ACA-compliant plan. In two of the 31 tests, the sales representatives were inconsistent or unclear, but they did not appear to be engaging in deceptive sales practices. Of concern were eight of the 31 tests in which sales representatives engaged in potentially deceptive marketing practices, such as making claims that a pre-existing condition was covered in a plan when it was not. These eight cases will be referred to the FDC and appropriate state for review.
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