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Association Health Plans Archives — Protect Our Care

SHOT/CHASER: President Trump Doubles Down on Absurd Claims About Non-Existent Health Care Plans

During remarks given yesterday in Iowa and again today at the White House, President Donald Trump touted his junk association health plans (AHPs). There were just a few problems:

SHOT:  

Trump:  Association Health Plans Are Doing “Record Business.”  “Alex Acosta has come up with incredible healthcare plans through the Department of Labor — association plans where you associate, where you have groups and you get tremendous healthcare at a very small cost.  And it’s across state lines; you can compete all over the country. They compete. They want to get it. And, Alex, I hear it’s like record business that they’re doing. We just opened about two months ago, and I’m hearing that the numbers are incredible.  Numbers of people that are getting really, really good healthcare instead of Obamacare, which is a disaster.” [Donald Trump, Remarks at Workforce Development Roundtable, Peosta, IA, 7/26/18]

Trump Said “Associated Health Plans” Have “Just Opened” And “Millions Of People Are Going To Be Signing Up.”  “Through associated health plans we are giving Americans the ability — just opened — millions of people are going to be signing up. Millions and millions. Much better and more affordable healthcare, including bidding across state lines.” [Donald Trump, Press Availability, Washington, DC, 7/27/18]

CHASER:  

Association health plans won’t even go on sale until September and they’re already being described as “kind of a flop” as major associations decline to participate and 11 states filed suit to challenge the rule for undermining the protections of the Affordable Care Act.

HEADLINE:  “Trump Touts Demand For Healthcare Plans That Don’t Exist Yet.” [Washington Examiner, 7/27/18]

HEADLINE:  “Trump Celebrates ‘Record’ Sales of Nonexistent Health Insurance Policies” [Huffington Post, 7/27/18]

HEADLINE:  “States Sue Trump Administration Over Association Health Plans”  [Politico, 7/27/18]

HEADLINE:  “Trump Says New Health Plans, Not Available Until September, Already Doing ‘record Business’” [The Hill, 7/26/18]

HEADLINE:  “Trump’s Association Health Plans Are Kind Of A Flop” [Vox, 7/20/18]

HEADLINE:  “Trump Promised Them Better, Cheaper Health Care. It’s Not Happening.”  [Politico, 7/19/18]

Trump Administration, Ignoring 95% of Health Care Groups, Finalizes Association Rule

Washington, D.C. – The Trump Administration just announced new mandates that force weak products that fail to cover critical consumer needs and force costs up for everyone else onto the health insurance markets. Over 95% of health care experts and advocates opposed the change. Protect Our Care Campaign Director Brad Woodhouse released the following statement about these junk plans in response:

“Association health plans fail to provide real coverage because they can refuse to cover critical consumer protections like prescription drug coverage, mental health care, and maternity care, and studies show that these types of plans have a long history of fraud and unpaid claims. These garbage health plans are just the latest Trump Administration attempt to undermine and sabotage our health insurance – sticking Americans with higher costs and chipping away protections for millions and millions of people with pre-existing conditions. The Republican war on health care continues to mean you pay more, you get less.”

OVER 95% OF COMMENTERS OPPOSED ASSOCIATION HEALTH PLANS

Not A Single Group Representing Patients, Physicians, Nurses Or Hospitals Voiced Support In The Public Comments. “Altogether, more than 95% — or 266 of 279 — of the healthcare groups that filed comments about the proposed association health plan regulation expressed serious concern or opposed it.” [Los Angeles Times, 5/30/18]

INSURANCE COMMISSIONERS AGREE THAT ASSOCIATION HEALTH PLANS ARE BAD FOR CONSUMERS

National Association of Insurance Commissioners: Association Health Plans Are Bad For Consumers. “AHPs would fragment and destabilize the small group market, resulting in higher premiums for many small businesses…AHPs would be exempt from state solvency requirements, patient protections, and oversight exposing consumers to significant harm.” [NAIC]

Pennsylvania Insurance Commissioner Concerned About Potential For Consumer Harm Under AHPs. “The proposed rule would also loosen existing commonality of interest requirements to allow associations to form simply based on membership in the same trade, industry or profession..If a self funded MEWA were permitted to form in a neighboring state and to sell to Pennsylvania association members under the metro area provision, Pennsylvania regulators would not have the ability to assist a Pennsylvania resident if problems arise with the other state’s association, including claim denials, or, worse yet, in the event of insolvency or fraud.” [PA Insurance Commissioner Jessica Altman, 3/6/18]

California Insurance Commissioner: “The Proposed Rule Is A Perfect Storm Of Bad Ideas.” “The AHPs proposed by this rule will harm consumers by degrading the individual and small group health insurance markets through adverse selection, and will impinge upon states’ rights while opening the door to fraud, insolvency and abuse…The proposed rule in no way limits the ability of states to regulate MEWAs, insurers offering coverage through MEWAs, and insurance producers marketing that coverage to employers. However, the checkered history of MEWAs instructs that unscrupulous actors will try and exploit any change which can be mischaracterized as constituting ERISA preemption.” [CA Insurance Commissioner Dave Jones, 3/6/18]

PATIENT GROUPS, HOSPITALS, AND KEY HEALTH STAKEHOLDERS CONDEMN AHPs

American Cancer Society Cancer Action Network: “We Are Also Concerned About The Proliferation Of AHPs Because Of Their History Of Fraud And Financial Instability.” “For a long time, these products were not traditionally subject to the same state insurance solvency and licensing requirements that allowed regulators to maintain necessary oversight. If an AHP lacked the financial resources to pay claims, then enrollees were left with no coverage and high out-of-pocket costs. Even in cases of well-meaning AHP sponsors, insolvencies led to millions of dollars in unpaid claims.” [ACS-CAN, 3/6/18]

American Hospital Association: AHPs “Ultimately Decreas[e] Access To Affordable Coverage.” “We are concerned that this rule fails to protect against discriminatory insurance practices and could contribute to instability in the individual and small group market, ultimately decreasing access to affordable coverage.” [American Hospital Association, 3/6/18]

Coalition Of 118 Patient And Community Organizations Urges Department Of Labor To Reconsider AHPs. “We believe that the proposed changes would negatively impact access to quality, affordable care for consumers, disrupt the individual and small business marketplace, and further strain the limited resources of state regulators…The intent of the President’s executive order was to increase consumer choice while curbing costs, however we believe that AHPs as proposed would invariably weaken the individual and small group markets leading to higher healthcare costs for all; higher premiums for those who stay in the marketplace, and high out of-pocket costs for those who are covered by AHPs for unexpected medical needs.” [Coalition Of 118 Patient And Community Organizations, 3/6/18]

AHPs ARE HOTSPOTS FOR FRAUD IN STATES

Florida

A Labor Department Lawsuit Revealed An AHP Had Concealed Financial Problems And Left $3.6 Million In Unpaid Claims. “The Labor Department filed suit last year against a Florida woman and her company to recover $1.2 million that it said had been improperly diverted from a health plan serving dozens of employers. The defendants concealed the plan’s financial problems from plan participants and left more than $3.6 million in unpaid claims, the department said in court papers.” [New York Times, 10/21/17]

In Florida, A Man Pleaded Guilty To Embezzling $700,000 In Premiums From the AHP He Ran in 2004 To Help Build A Home For Himself And Was Sentenced To 57 Months In Prison. “A Florida man was sentenced to 57 months in prison after he pleaded guilty to embezzling about $700,000 in premiums from a health plan that he had marketed to small businesses. The Labor Department and the Justice Department said he had used some of the plan premiums to build a home for himself.” [New York Times, 10/21/17]

In 2004, A Florida Woman Was Left With $500,000 In Unpaid Medical Bills While She Was Covered By Association Health Plan. “Joan Piantadosi, a small business owner bought health insurance from Employers Mutual LLC through an association for herself, her family, and her employees. She was left with more than $500,000 in unpaid medical bills for her husband’s treatment during the time she was covered by Employers Mutual LLC. On top of that, her husband needed a liver transplant to live. In her own words, “[W]e were informed that since we lacked insurance coverage, we would have to pay a deposit of $150,000 before my husband could enter the hospital’s Liver Transplant Inpatient program. We simply did not have $150,000 to cover the deposit. Consequently, my husband was removed from the recipient list…We feared, among other things, that my husband might die while we were attempting to deal with the predicament of being uninsured despite having paid premiums to what appeared to be a legitimate health insurer.” [United Hospital Fund, 3/6/18]

Louisiana

In Louisiana, Two People Pleaded Guilty To Using Money From The AHP For Spa Treatments, Diamond Cuff Links, Foreign Travel And Other Personal Expenses. “And in Louisiana, two people pleaded guilty to conspiracy charges after the government found that they had taken money from the medical benefit fund of a trade association and used it to pay for spa treatments, diamond cuff links, evening gowns, foreign travel and other personal expenses.” [New York Times, 10/21/17]

Texas

In Texas, Patients Thought They Were Insured Until Told Otherwise In A Moment Of Crisis. “Robert Loiseau, who represented fraud victims in Texas, recalled their shock when they tried to receive care. ‘People bought insurance coverage because it was cheap and seemed to provide them with coverage they needed,’ he said. ‘It had a veneer of legitimacy. But when they went to the doctor, they found out all of a sudden that their insurance company, their perceived insurance company, was in receivership and that they had no coverage.’” [New York Times, 10/21/17]

Between 2001 And 2003, Texas Shut Down 129 Unauthorized Insurance Operations. “In the last two years, the Texas Insurance Department shut down 129 unauthorized insurance companies, affiliates, operators, and their agents whose illegal actions affected more than 20,000 Texans.” [The Commonwealth Fund, August 2003]

New Jersey

In 2002, An AHP Became Insolvent With $15 Million In Outstanding Claims. “For example, when a long-standing AHP in New Jersey that covered 20,000 people became insolvent in 2002, it had $15 million in outstanding medical bills. This left participating businesses and their employees’ claims unpaid even though employers paid premiums to the AHP.” [Commonwealth Fund, 10/10/17]

A Health Plan For New Jersey Small Businesses Collapsed With $7 Million In Unpaid Claims. “In another case, a federal appeals court found that a healthplan for small businesses in New Jersey was ‘aggressively marketed but inadequately funded.’ The plan collapsed with more than $7 million in unpaid claims.” [New York Times, 10/21/17]

South Carolina

In South Carolina, A Man Pleaded Guilty To Diverting Nearly $1 Million From An AHP For Churches And Small Businesses, Leaving $1.7 Million In Unpaid Claims. “A South Carolina man pleaded guilty after the government found that he had diverted more than $970,000 in insurance premiums from a health plan for churches and small businesses. ‘His embezzlement and the plan’s consequent failure left behind approximately $1.7 million in unpaid medical claims,’ the Labor Department said.” [New York Times, 10/21/17]

Across State Lines: North Carolina, Maryland, And Beyond

One AHP Scheme Shows How AHPs Can Move From State To State.Families USA chronicled an AHP scheme involving the American Trade Association, Smart Data Solutions, and Serve America Assurance. They found:

  • “Even after one state identifies a problem, the company may continue to operate for years in other states. North Carolina issued a cease and desist order to stop many of the players in this case from selling insurance in 2008.”
  • “But by June 2010, when Maryland issued a cease and desist order, the plans sold by these players had been identified in at least 23 states.„ Estimates of total premiums paid to these companies for unauthorized, unlicensed plans range from $14 million to $100 million.”
  • “This particular scheme operated through associations that went by many different names. (At least one of the players in this case was involved in a previous case concerned with fraudulent insurance sold through an association of employers in 2001-2002.)”
  • “Consumers are often ill-protected when they buy coverage through an association, and the web of relationships among salespeople, associations, administrators, and actual insurers can be difficult for regulators to unravel and oversee. Consumers may be encouraged to join fake associations to buy health insurance so they have an illusion of coverage—and the insurers collect membership dues and premiums while illegally avoiding state oversight).” [Families USA, October 2010]

GAO Report In 1992 Showed Similar AHPs Left At Least 398,000 Participants With More Than $123 Million In Unpaid Claims And More Than 600 Plans In Almost Every State Failed To Comply With State Laws.“Back in 1992, the Government Accountability Office issued a scathing report on these multiple employer welfare arrangements (known as MEWAs; they’re pronounced “mee-wahs”) in which small businesses could pool funds to get the lower-cost insurance typically available only to large employers. These MEWAs, said the government, left at least 398,000 participants and their beneficiaries with more than $123 million in unpaid claims between January 1988 and June 1991. Furthermore, states reported massive and widespread problems with MEWAs. More than 600 plans in nearly every U.S. state failed to comply with insurance laws. Thirty-three states said enrollees were sometimes left without health coverage when MEWAs disbanded…’MEWAs have proven to be a source of regulatory confusion, enforcement problems and, in some instances, fraud,’ the GAO wrote at the time.” [Washington Post, 10/12/17]

President Trump Doubles Down on Health Care Sabotage at Bill Signing Ceremony

Washington, D.C. – After President Trump boasted about his Administration’s ongoing health care sabotage during a bill signing, saying that “we will have gotten rid of a majority of Obamacare” in relation to his Administration’s expected rules on short-term and association health plans, Protect Our Care Campaign Director Brad Woodhouse released the following statement:

“President Trump is bragging about his Administration’s continuing efforts to undermine and sabotage Americans’ health coverage through short-term junk and association health plans on the very same day that a new analysis shows unprecedented opposition to both proposals from over 90% of health care groups. Instead of forging ahead down this destructive path, Trump should listen to the vast majority of Americans, who oppose his repeal-and-sabotage agenda, and withdraw this harmful rule. It’s time for President Trump to end this partisan war on Americans’ health care.”

FACT SHEETS:

SHORT-TERM PLANS leave people who get sick with thousands of dollars in medical bills because they don’t have to cover basic medical services.

ASSOCIATION HEALTH PLANS may also refuse to cover basic medical services, and have a long history of fraud and unpaid claims.

Health Insurance Experts Confirm Rate Hikes Driven By Sabotage

New estimates from the health insurance industry trade group and other expert organizations are making it clear that Republican sabotage is dramatically increasing the premiums everyday Americans will be paying for health coverage in 2019. In a report that should shock every person struggling to afford health care, the health insurance companies expect rate hikes of up to 15.7% specifically because of Republican actions to undermine and sabotage the health care system.

AHIP: Factors Influencing 2019 Premiums in the Individual Market [5/25]

  • Short-term plan regulation: “Proposed rule would likely increase premiums in the individual market by 1.7% in the near-term and up to 6.6% once these changes are fully implemented.”
  • Association Health Plan regulation: “Could increase premiums in the individual market by up to 4 percent.”
  • Tax bill: Elimination of the individual mandate will increase premiums in 2019 … Recent regulatory guidance by the Administration expanded the list of hardship exemptions to the mandate for 2018, which could inject further uncertainty in the market ahead of 2019.”

AHIP, May 2018

Congressional Budget Office: Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2018 to 2028 [5/23]

  • Significant hikes projected: Premiums for benchmark plans are expected to increase by 15 percent next year, and 7 percent per year between 2019 and 2028.
  • Republican sabotage to blame: CBO says these coverage losses and premium increases will happen “mainly because the penalty associated with the individual mandate will be eliminated and premiums in the nongroup market will be higher.”

CBO, May 2018

Center for American Progress: State-by-State Estimated Premium Increases due to Individual Mandate Repeal and Short-Term Plan Rule [5/18]

  • Four-figure rate hikesEstimated premium increases due to these acts of marketplace sabotage average $1,013 nationally for benchmark premiums for a 40-year-old individual.”
  • Cumulative sabotage impact: “After all, through previous acts of marketplace sabotage, the Trump administration has already unnecessarily driven up 2018 premiums for ACA-compliant coverage. For example, last year, CAP estimated that the Trump administration’s decisions to cancel cost-sharing reduction payments and to undermine enforcement of the individual mandate would increase average benchmark premiums for a 40-year-old by $1,061.”

Association Health Plans Endanger Consumers

NATIONALLY, ASSOCIATION HEALTH PLANS HAVE A HISTORY OF FRAUD AND UNPAID CLAIMS

Between 2000 and 2002, AHPs Left 200,000 Policyholders with $252 Million In Unpaid Medical Bills. “There have been several documented cycles of large-scale scams. According to the GAO, between 1988 and 1991, multiple employer entities left 400,000 people with medical bills exceeding $123 million. The most recent cycle was between 2000 and 2002, as 144 entities left 200,000 policyholders with $252 million in unpaid medical bills.” [United Hospital Fund, 3/6/18]

  [GAO, February 2004]

Former Insurance Fraud Investigator: “Fraudulent Association Health Plans Have Left Hundreds Of Thousands Of People With Unpaid Claims.” “Marc I. Machiz, who investigated insurance fraud as a Labor Department lawyer for more than 20 years, said the executive order was ‘summoning back demons from the deep.’ ‘Fraudulent association health plans have left hundreds of thousands of people with unpaid claims,’ he said. ‘They operate in a regulatory never-never land between the Department of Labor and state insurance regulators.’” [New York Times, 10/21/17]

Dr. James Madara, CEO of the American Medical Association: Association Health Plans Have Potential To Threaten Health And Financial Stability. “Fraudsters prey upon areas of regulatory ambiguity and may challenge such authority in courts to further delay enforcement, which allows more time to increase unpaid medical claims…Without proper oversight to account for insolvency and fraud, AHPs have the potential to … (threaten) patients’ health and financial security and the financial stability of physician practices and other providers.” [Modern Healthcare, 3/7/18]

INSURANCE COMMISSIONERS AGREE THAT ASSOCIATION HEALTH PLANS ARE BAD FOR CONSUMERS

National Association of Insurance Commissioners: Association Health Plans Are Bad For Consumers. “AHPs would fragment and destabilize the small group market, resulting in higher premiums for many small businesses…AHPs would be exempt from state solvency requirements, patient protections, and oversight exposing consumers to significant harm.” [NAIC]

Pennsylvania Insurance Commissioner Concerned About Potential For Consumer Harm Under AHPs. “The proposed rule would also loosen existing commonality of interest requirements to allow associations to form simply based on membership in the same trade, industry or profession..If a self funded MEWA were permitted to form in a neighboring state and to sell to Pennsylvania association members under the metro area provision, Pennsylvania regulators would not have the ability to assist a Pennsylvania resident if problems arise with the other state’s association, including claim denials, or, worse yet, in the event of insolvency or fraud.” [PA Insurance Commissioner Jessica Altman, 3/6/18]

California Insurance Commissioner: “The Proposed Rule Is A Perfect Storm Of Bad Ideas.” “The AHPs proposed by this rule will harm consumers by degrading the individual and small group health insurance markets through adverse selection, and will impinge upon states’ rights while opening the door to fraud, insolvency and abuse…The proposed rule in no way limits the ability of states to regulate MEWAs, insurers offering coverage through MEWAs, and insurance producers marketing that coverage to employers. However, the checkered history of MEWAs instructs that unscrupulous actors will try and exploit any change which can be mischaracterized as constituting ERISA preemption.” [CA Insurance Commissioner Dave Jones, 3/6/18]

PATIENT GROUPS, HOSPITALS, AND KEY HEALTH STAKEHOLDERS CONDEMN AHPs

American Cancer Society Cancer Action Network: “We Are Also Concerned About The Proliferation Of AHPs Because Of Their History Of Fraud And Financial Instability.” “For a long time, these products were not traditionally subject to the same state insurance solvency and licensing requirements that allowed regulators to maintain necessary oversight.5 If an AHP lacked the financial resources to pay claims, then enrollees were left with no coverage and high out-of-pocket costs. Even in cases of well-meaning AHP sponsors, insolvencies led to millions of dollars in unpaid claims.” [ACS-CAN, 3/6/18]

American Hospital Association: AHPs “Ultimately Decreas[e] Access To Affordable Coverage.” “We are concerned that this rule fails to protect against discriminatory insurance practices and could contribute to instability in the individual and small group market, ultimately decreasing access to affordable coverage.” [American Hospital Association, 3/6/18]

Coalition Of 118 Patient And Community Organizations Urges Department Of Labor To Reconsider AHPs. “We believe that the proposed changes would negatively impact access to quality, affordable care for consumers, disrupt the individual and small business marketplace, and further strain the limited resources of state regulators…The intent of the President’s executive order was to increase consumer choice while curbing costs, however we believe that AHPs as proposed would invariably weaken the individual and small group markets leading to higher healthcare costs for all; higher premiums for those who stay in the marketplace, and high out of-pocket costs for those who are covered by AHPs for unexpected medical needs.” [Coalition Of 118 Patient And Community Organizations, 3/6/18]

AHPs ARE HOTSPOTS FOR FRAUD IN STATES:

Florida

A Labor Department Lawsuit Revealed An AHP Had Concealed Financial Problems And Left $3.6 Million In Unpaid Claims. “The Labor Department filed suit last year against a Florida woman and her company to recover $1.2 million that it said had been improperly diverted from a health plan serving dozens of employers. The defendants concealed the plan’s financial problems from plan participants and left more than $3.6 million in unpaid claims, the department said in court papers.” [New York Times, 10/21/17]

In Florida, A Man Pleaded Guilty To Embezzling $700,000 In Premiums From the AHP He Ran in 2004 To Help Build A Home For Himself And Was Sentenced To 57 Months In Prison. “A Florida man was sentenced to 57 months in prison after he pleaded guilty to embezzling about $700,000 in premiums from a health plan that he had marketed to small businesses. The Labor Department and the Justice Department said he had used some of the plan premiums to build a home for himself.” [New York Times, 10/21/17]

In 2004, A Florida Woman Was Left With $500,000 In Unpaid Medical Bills While She Was Covered By Association Health Plan. “Joan Piantadosi, a small business owner bought health insurance from Employers Mutual LLC through an association for herself, her family, and her employees. She was left with more than $500,000 in unpaid medical bills for her husband’s treatment during the time she was covered by Employers Mutual LLC. On top of that, her husband needed a liver transplant to live. In her own words, “[W]e were informed that since we lacked insurance coverage, we would have to pay a deposit of $150,000 before my husband could enter the hospital’s Liver Transplant Inpatient program. We simply did not have $150,000 to cover the deposit. Consequently, my husband was removed from the recipient list…We feared, among other things, that my husband might die while we were attempting to deal with the predicament of being uninsured despite having paid premiums to what appeared to be a legitimate health insurer.” [United Hospital Fund, 3/6/18]

Louisiana

In Louisiana, Two People Pleaded Guilty To Using Money From The AHP For Spa Treatments, Diamond Cuff Links, Foreign Travel And Other Personal Expenses. “And in Louisiana, two people pleaded guilty to conspiracy charges after the government found that they had taken money from the medical benefit fund of a trade association and used it to pay for spa treatments, diamond cuff links, evening gowns, foreign travel and other personal expenses.” [New York Times, 10/21/17]

Texas

In Texas, Patients Thought They Were Insured Until Told Otherwise In A Moment Of Crisis. “Robert Loiseau, who represented fraud victims in Texas, recalled their shock when they tried to receive care. ‘People bought insurance coverage because it was cheap and seemed to provide them with coverage they needed,’ he said. ‘It had a veneer of legitimacy. But when they went to the doctor, they found out all of a sudden that their insurance company, their perceived insurance company, was in receivership and that they had no coverage.’” [New York Times, 10/21/17]

Between 2001 And 2003, Texas Shut Down 129 Unauthorized Insurance Operations. “In the last two years, the Texas Insurance Department shut down 129 unauthorized insurance companies, affiliates, operators, and their agents whose illegal actions affected more than 20,000 Texans.” [The Commonwealth Fund, August 2003]

New Jersey

In 2002, An AHP Became Insolvent With $15 Million In Outstanding Claims. “For example, when a long-standing AHP in New Jersey that covered 20,000 people became insolvent in 2002, it had $15 million in outstanding medical bills. This left participating businesses and their employees’ claims unpaid even though employers paid premiums to the AHP.” [Commonwealth Fund, 10/10/17]

A Health Plan For New Jersey Small Businesses Collapsed With $7 Million In Unpaid Claims. “In another case, a federal appeals court found that a health plan for small businesses in New Jersey was ‘aggressively marketed but inadequately funded.’ The plan collapsed with more than $7 million in unpaid claims.” [New York Times, 10/21/17]

South Carolina

In South Carolina, A Man Pleaded Guilty To Diverting Nearly $1 Million From An AHP For Churches And Small Businesses, Leaving $1.7 Million In Unpaid Claims. “A South Carolina man pleaded guilty after the government found that he had diverted more than $970,000 in insurance premiums from a health plan for churches and small businesses. ‘His embezzlement and the plan’s consequent failure left behind approximately $1.7 million in unpaid medical claims,’ the Labor Department said.” [New York Times, 10/21/17]

Across State Lines: North Carolina, Maryland, And Beyond

One AHP Scheme Shows How AHPs Can Move From State To State. Families USA chronicled an AHP scheme involving the American Trade Association, Smart Data Solutions, and Serve America Assurance. They found:

  • “Even after one state identifies a problem, the company may continue to operate for years in other states. North Carolina issued a cease and desist order to stop many of the players in this case from selling insurance in 2008.”
  • “But by June 2010, when Maryland issued a cease and desist order, the plans sold by these players had been identified in at least 23 states.„ Estimates of total premiums paid to these companies for unauthorized, unlicensed plans range from $14 million to $100 million.”
  • “This particular scheme operated through associations that went by many different names. (At least one of the players in this case was involved in a previous case concerned with fraudulent insurance sold through an association of employers in 2001-2002.)”
  • “Consumers are often ill-protected when they buy coverage through an association, and the web of relationships among salespeople, associations, administrators, and actual insurers can be difficult for regulators to unravel and oversee. Consumers may be encouraged to join fake associations to buy health insurance so they have an illusion of coverage—and the insurers collect membership dues and premiums while illegally avoiding state oversight).” [Families USA, October 2010]

GAO Report In 1992 Showed Similar AHPs Left At Least 398,000 Participants With More Than $123 Million In Unpaid Claims And More Than 600 Plans In Almost Every State Failed To Comply With State Laws. “Back in 1992, the Government Accountability Office issued a scathing report on these multiple employer welfare arrangements (known as MEWAs; they’re pronounced “mee-wahs”) in which small businesses could pool funds to get the lower-cost insurance typically available only to large employers. These MEWAs, said the government, left at least 398,000 participants and their beneficiaries with more than $123 million in unpaid claims between January 1988 and June 1991. Furthermore, states reported massive and widespread problems with MEWAs. More than 600 plans in nearly every U.S. state failed to comply with insurance laws. Thirty-three states said enrollees were sometimes left without health coverage when MEWAs disbanded…’MEWAs have proven to be a source of regulatory confusion, enforcement problems and, in some instances, fraud,’ the GAO wrote at the time.” [Washington Post, 10/12/17]

“By The Time They Discover They’ve Been Sold A Fraudulent Product, The Promoter Will Be On His Way To The Caribbean”: Responses to the Trump Administration’s Proposed Junk Insurance Rule

Yesterday, the Trump Administration announced a proposed rule to expand association health plans, which will gut protections and raise costs for people with pre-existing conditions and further destabilize the marketplace. The coverage of these plans has focused on what they are: junk insurance plans. Don’t believe us? Take a look for yourself…

Chris Hansen, American Cancer Society Cancer Action Network: “The Rule Proposed Today Will Almost Certainly Result In More People Facing Financial Distress When An Unexpected Health Crisis Happens.” “Consumer groups, state officials and Blue Cross and Blue Shield plans have strenuously opposed similar ideas for years. Association health plans, they say, will tend to attract employers with younger, healthier workers, leaving behind sicker people in more comprehensive, more expensive plans that fully comply with the Affordable Care Act. That could drive up premiums, which already have risen steadily as Republicans have taken aim at President Barack Obama’s signature domestic achievement. ‘Those with serious health conditions like cancer would be left paying ever-increasing premiums for comprehensive coverage,’ said Chris Hansen, the president of the American Cancer Society Cancer Action Network. ‘The rule proposed today will almost certainly result in more people facing financial distress when an unexpected health crisis happens.’” [New York Times, 1/4]

Marc I. Machiz, Former Labor Department Investigator: “Any Idiot With A Word Processor Can Create An Association In 10 Minutes…By The Time They Discover They’ve Been Sold A Fraudulent Product, The Promoter Will Be On His Way To The Caribbean.” “Similar health plans have a history of fraud and abuse that have left employers and employees with hundreds of millions of dollars in unpaid medical bills. Marc I. Machiz, who investigated insurance fraud as a Labor Department lawyer for more than 20 years, said the proposed rules were an invitation to more scams. ‘Any idiot with a word processor can create an association in 10 minutes and market it to small employers and individuals who certify that they are self-employed,” Mr. Machiz said. ‘The employers and individuals will pay premiums. By the time they discover they’ve been sold a fraudulent product, the promoter will be on his way to the Caribbean.’” [New York Times, 1/4]

Health Affairs: “The Proposed Rule Itself Acknowledges That Some AHPs Have ‘Failed To Pay Promised Benefits To Sick And Injured Workers While Diverting, To The Pockets Of Fraudsters, Employer And Employee Contributions.” “The proposed rule itself acknowledges that some AHPs have ‘failed to pay promised health benefits to sick and injured workers while diverting, to the pockets of fraudsters, employer and employee contributions from their intended purpose of funding benefits’ and that Congress enacted reforms to address AHP abuse in the past. Yet, by broadening the availability of AHPs and relaxing commonality of interest standards, the proposed rule likely opens the door to additional fraudulent AHP behavior and the insolvency and unpaid claims that accompany it. The rule acknowledges that the Department would need to commit additional resources to AHP oversight if the proposal is finalized to address AHP mismanagement and abuse.” [Health Affairs, 1/5]

Los Angeles Times: CBO: Previous Proposals “Would Have Made Coverage Unaffordable For Many Consumers With Preexisting Medical Conditions.” “Many patient groups and consumer advocates — who are already alarmed by Trump administration efforts to undermine the 2010 health law — fear that less comprehensive health plans will leave Americans without vital protections… By allowing healthier Americans to buy plans that don’t cover expensive medications or other medical benefits, these plans also risk driving up costs for sick patients who need the more extensive coverage. For example, proposals last year by congressional Republicans to allow health plans to offer slimmed down benefits would have made coverage unaffordable for many consumers with preexisting medical conditions, according to analyses by the nonpartisan Congressional Budget Office.” [Los Angeles Times, 1/4]

The Hill: Association Plans “Would Likely Drive Up Premiums” And “Unlike Obamacare Plans, AHPs Could Charge Higher Premiums Based On Age And Gender.” “Critics say AHPs could still find other ways to cherry-pick only the young, healthy people. ‘You can be sure they are going to design benefit packages to attract healthier people,” and “siphon them away from the individual market,’ said Sabrina Corlette, a professor at the Georgetown University Center on Health Insurance Reforms. Leaving the less healthy individuals in the individual and small group markets would likely drive up the premiums. AHPs could also decline to cover prescription drugs, which could discourage sick people from enrolling and, unlike ObamaCare plans, AHPs could charge higher premiums based on age and gender.” [The Hill, 1/4]

America’s Health Insurance Plans: “We Are Concerned That This Could Create Or Expand Alternative, Parallel Markets For Health Coverage, Which Would Lead To Higher Premiums For Consumers, Particularly Those With Pre-Existing Conditions.” “Supporters of the ACA have said that relaxing the rules on associations could destabilize the individual insurance market, where roughly 17 million people buy their own insurance either on or off the ACA exchanges. And they say enabling individuals to join associations would provide an off-ramp from the exchanges that would drain away the younger, healthier people who are needed to keep premiums in check. ‘We are concerned that this could create or expand alternative, parallel markets for health coverage, which would lead to higher premiums for consumers, particularly those with pre-existing conditions,’ said a Dec. 14 letter from groups including America’s Health Insurance Plans, a top insurers’ trade association.” [Wall Street Journal, 1/4]

Washington Post:”The Rules Would Allow Such Plans To Be Reclassified So They No Longer Would Have To Include A Set Of 10 Essential Health Benefits – Including Maternity Care, Prescription Drugs And Mental Health Services.” “Specifically, the rules would allow such health plans to be reclassified so they no longer would have to include a set of 10 essential health benefits — including maternity care, prescription drugs and mental health services — that the ACA requires of insurance sold to individuals and small companies… Unlike [marketplace plans], the association plans could charge customers different prices depending on their age, gender and location. ‘The potential is that it creates an uneven playing field,’ said Kevin Lucia, a research professor at Georgetown University’s Center on Health Insurance Reforms, who worked on early stages of the 2010 health-care law within the Obama administration.” [Washington Post, 1/4]

Politico: State Insurance Advocates “Have Warned That Lax Rules Could Open The Door To A New Wave Of Poorly Regulated Health Plans That Exclude Coverage Of Key Services. However, state insurance regulators and Obamacare advocates have warned that lax rules could open the door to a new wave of poorly regulated health plans that exclude coverage of key services required by the Affordable Care Act, such as hospitalizations and prescription drugs. ‘The Trump administration has declared open season for fraudsters selling junk insurance while those with pre-existing conditions will find health care further and further out of reach,’ said Sen. Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee.” [Politico, 1/4]

USA Today: As Proposed, “These Plans Are Governed By State Insurance Rules So Might Not Have As Sweeping Coverage Of What the ACA Considered ‘Essential Health Benefits.’” The regulations would allow the expansion of so-called ‘association health plans,’ which are groups of small businesses and possibly individuals that band together to purchase insurance. These plans are governed by state insurance rules so might not have as sweeping coverage of what the ACA considered ‘essential health benefits,’ such as maternity care, prescription drug coverage or hospitalization. Some states actually require more comprehensive benefits though… Consumers could buy these plans across state lines, although whether doctor and hospital networks would be sufficient remains a question.” [USA Today, 1/4]

Associated Press: Insurance Industry Groups Are Skeptical Of Trump’s Idea, Saying It Could Undermine The Current State Markets.” “The new rule would make it easier for groups, or associations, to sponsor health plans that don’t have to meet all consumer protection and benefit requirements of the Obama law… Insurance industry groups are skeptical of Trump’s idea, saying it could undermine the current state markets. Patient groups are concerned about losing protections. Some state regulators object to federal interference.” [AP, 1/4]

Reuters: “The Rule Could Destabilize Several States’ Individual Insurance Markets.” “Proponents of Obamacare say the rule would undermine the individual insurance market created under the law by allowing young and healthy people to purchase cheaper insurance, leaving the sickest and most expensive patients in the Obamacare markets, driving up costs. Hospitals, insurers and medical groups criticized the rule in December and said it would make health insurance unaffordable for people with pre-existing conditions. The rule could destabilize several states’ individual insurance markets because healthier people could access cheaper insurance, said Evercore ISI analyst Michael Newshel, adding that it is still unclear whether significant numbers of people will opt for the slimmer plans.” [Reuters, 1/5]