By Erik Larson and Zachary Tracer / Bloomberg News
NEW YORK — The short-term medical plans promoted in President Donald Trump’s new executive order on health care have a long history of customer disputes over pre-existing conditions and denied claims — just the sort of scenarios that were being weeded out by Obamacare.
The Affordable Care Act pushes Americans to buy comprehensive long-term coverage; the Obama administration limited short-term plans to three months and prevents them from being extended. The temporary plans are geared toward people who are between jobs or considering retirement.
But on Oct. 12, Trump directed his department heads to consider allowing the policies to last almost a year and to make them renewable, a move that could undermine Obamacare by dividing the insured between cheaper healthy customers and those with costly ailments.
The short-term plans have attracted as many as 1 million people, some of whom were left swimming in debt when their health took a turn. The federal government flagged the plans at least as far back as 1992, when a General Accounting Office report found they’d left nearly 400,000 members and their beneficiaries with $123 million in unpaid medical claims in a four-year span.
Take Dawn Jones, a former product-liability attorney at King and Spalding in Atlanta who left the firm in 2014 to start her own practice. She bought a short-term plan from Golden Rule Insurance, a unit of UnitedHealth Group Inc., so she’d be covered between jobs, according to court documents. Then, she was diagnosed with breast cancer.
Despite showing evidence she was unaware of the cancer when she bought the policy, the insurer didn’t pay for Jones’s treatment, leaving her with a $400,000 medical bill, according to a complaint she filed against the company in September 2016. Jones claimed the insurer breached its duty to provide coverage “for her medically necessary, life-saving breast cancer treatment.”
“Only after Golden Rule had collected its full six-months of premiums from plaintiff, did it deny all claims related to her breast cancer diagnosis and treatment,” her lawyer wrote in the complaint.
But the judge sided with Golden Rule and dismissed the case in August, finding the policy agreement clearly stated that preexisting conditions wouldn’t be covered, even if the customer was unaware of the condition. Jones wasn’t diagnosed until after she bought her policy. Neither she nor her lawyer returned a call for comment.
Tracey Lempner, a UnitedHealth spokeswoman, had no comment.
Avoiding such scenarios under Obamacare meant penalizing Americans who didn’t buy insurance and forcing insurers to accept customers regardless of preexisting conditions, among other rules. That has increased costs for healthy people, many Republicans have claimed.
The short-term plans would create another option outside of the ACA, and would not be “subject to costly Obamacare mandates and rules,” according to a summary of Trump’s directive. The order came on the heels of Republicans’ failed attempts to repeal the ACA. Hours after the order, Trump also said he would cut off subsidies to insurers.
The short-term plans “are an unfortunate end-run around what the ACA was supposed to do,” said Rachel Geman, an attorney who sued another insurer over the denial of her client’s claims. “It seems logical that we’ll have more underlying problems and more lawsuits by expanding these types of plans.”
Implementing Trump’s directive will likely require new regulations, meaning that the plans it’s expected to encourage wouldn’t be available until new rules are in place.
“This executive order is good news for consumers,” said Jeff Smedsrud, the founder of Healthcare.com, which offers short-term plans and other types of coverage. “Given all the uncertainty about health-care reform — whether Obamacare stays or goes — it is natural for consumers to want to ‘punt’ a decision about their long-term health insurance until some future date.”
According to Smedsrud, the niche market for short-term plans also includes people who are turning 26 and coming off a parent’s plan, as well as people whose income is too high to qualify for Obamacare subsidies but don’t make enough to afford a high-deductible “bronze” ACA plan.
“There is a niche market for short-term medical,” Smedsrud said.
Joel Ario, a former state insurance regulator who’s now a managing director at Manatt Health, said short-term plans have a role as long as they’re truly short-term and aren’t pitched as an alternative to major medical coverage.
“Most insurance regulators would tell you that these short-term plans tend to be sold in ways that unwary consumers are often surprised by, and suffer from,” said Ario, who previously worked on the ACA at the Department of Health and Human Services.
Lawsuits over short-term plans have been filed from coast to coast in recent years.
Californian Mohammed Azad in January sued Tokio Marine HCC over a short-term policy he purchased in 2015. Shortly after buying the plan, Azad had three separate health incidents that required doctor visits, and the company denied his claims and demanded years’ worth of detailed records about his medical history, according to the suit.
Azad also accused the insurer of training employees at a third-party company to answer its customer-service calls about denied claims to “deceive or otherwise obstruct policyholders” seeking to resolve their disputes, according to the complaint.
“Azad never received any refund of his premiums, and defendants never paid any of Azad’s claims,” according to the complaint. “Ultimately, Azad paid his medical bills himself.”
The case was dismissed in September, with Azad accepting an unspecified settlement, instead of filing an amended complaint, court records show. His lawyer, Geman, said the insurers are free to refuse coverage to people with preexisting conditions, but they still have to follow through on their policies when new health problems arise.
Doug Busker, a spokesman for Tokio Marine HCC, said the company doesn’t comment on litigation. He said the company stopped offering the plans earlier this year.
“Companies can abuse the privilege of exemption over preexisting conditions,” Geman said in a phone call. “It is a vehicle to deny coverage.”
In another case, William Masterson of Arkansas sued Starr Indemnity & Liability Co. in 2013 after the company denied a claim for more than $300,000 in expenses incurred after he was diagnosed with throat cancer during his policy period. The case settled.
Masterson’s lawyer, Robert Coleman, declined to comment on the details. But he expressed surprise that Trump wanted to increase the use of short-term policies, saying the general rule that Americans benefit from more choice doesn’t always apply.
“With insurance it doesn’t work that way,” Coleman said in a phone call from his office in Arkansas. “You gotta put everyone in the same pot.”