Many people losing Medicaid this year could be targeted by misleading marketing for “junk” health insurance.
Medicaid enrollment grew by more than 20 million people from February 2020 through March 2023 because of an emergency measure that kept states from dropping people from the government-run health insurance plan. The measure ended this year.
With millions of people shopping for new coverage, a secret shopper study conducted by researchers at Georgetown University finds that many of them may be sold “limited benefit” health plans, or, as President Joe Biden refers to them, “junk insurance.” These plans, which include short-term health plans, and health care sharing ministries, are often marketed as a cheaper alternative to full-fledged health insurance. But they’re not subject to the same regulations, don’t cover as many services, can charge higher premiums based on pre-existing conditions, and can impose limits on how much they cover.
A concerning situation for consumers
The researchers posed as one of two hypothetical health insurance shoppers: Terri, a healthy 22-year-old, and Lorraine, a 36-year-old with high cholesterol. Both women live in Texas, are due to lose Medicaid, earn $25,000 a year, and have a 2-year-old daughter who is still eligible for Medicaid.
Terri and Lorraine are eligible for subsidies that would allow them to buy comprehensive plans from the federal health insurance marketplace with $0 premiums that cover 94% of the cost of covered benefits, including plans with no deductibles. The researchers used Google to search for terms that someone losing Medicaid might use, like “cheap health insurance,” “Obamacare plans,” “ACA enroll,” and “HealthCare.gov.”
They picked the top three results for each search, including advertisements, and entered the information for Terri and Lorraine. Finally, the researchers had 20 conversations with representatives from the websites — 10 in which they posed as Terri and 10 in which they posed as Lorraine.
The study found that the top search results were for websites that connected shoppers with sales representatives selling limited benefit products, rather than the Affordable Care Act marketplace. They encountered aggressive sales tactics — one researcher received 100 voicemails in a week, Schwab says. None of the 20 representatives mentioned that Terri or Lorraine qualified for marketplace plans with $0 premium silver plans, including $0 premium plans with no deductible, and they frequently downplayed the shortcomings of the limited benefit products they were selling.
This is a concern, since consumers could lose out on big savings on comprehensive health insurance, says Rachel Schwab, a senior research associate at the Center on Health Insurance Reforms at Georgetown University who has served as consultant for the Leukemia & Lymphoma Society, and a co-author of the study. Insurance on the marketplace is as cheap as ever, thanks to expanded subsidies under the Inflation Reduction Act.
“If you have that option available and instead you’re being sold a more expensive and worse plan and not being told about this much better option, that’s very concerning from a consumer perspective,” Schwab says.
Regulating ‘junk insurance’
President Biden has vowed to crack down on “junk insurance” by limiting short-term health plans to a maximum of four months (the Trump administration allowed them to last for up to three years) and requiring clearer disclosure that they aren’t the same as comprehensive health insurance plans. The government was accepting public comments on these proposed rules through Sept. 11, but has yet to adopt them.
Short-term plans are only one kind of limited benefit plan. The Georgetown researchers were offered fixed-indemnity health plans, which pay a predetermined amount for a service, regardless of how much it actually costs. These plans don’t cover the same essential health benefits as comprehensive health insurance, and can exclude coverage for pre-existing conditions.
Regulators can go further by cracking down on deceptive marketing practices for a wider array of limited benefit plans, and restricting them from being sold during open enrollment periods, Schwab says. Search engines have a role to play too, in ensuring that consumers are led to reputable websites when they’re looking for health insurance.
Limited benefit plans have existed for years, but the opportunity for harm is especially large with so many people losing Medicaid this year, Schwab says. Instead of finding a neutral source of information for where to get coverage, the study shows that many people are being sold plans that won’t provide much financial protection. Good information is vital since health insurance is so complicated.
“It’s difficult to triangulate through all of the various cost factors,” Schwab says. “You have premiums, you have cost sharing,” which can include deductibles, copays, and coinsurance — plus you have to pick a plan with a network that covers your doctors.
The concerns raised by this study are that consumers may end up with products that don’t offer financial protection, or go without insurance altogether, at a time when enhanced subsidies have made millions of people eligible for free Affordable Care Act plans.
“We would hope that people would be able to take advantage of that,” Schwab says.
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