Think Your Health Care Costs Are Covered? Beware The 'Junk' Insurance Plan

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All health plans sold on HealthCare.Gov or one of state insurance exchanges are governed by Affordable Care Act rules. That means they have to provide comprehensive benefits to all applicants, regardless of their health or "preexisting conditions." But short-term plans and many others aren't bound by such restrictions. / Getty Images

Looking back, Sam Bloechl knows that when the health insurance broker who was helping him find a plan asked whether he'd ever been diagnosed with a major illness, that should have been a red flag. Preexisting medical conditions don't matter when you buy a comprehensive individual plan that complies with the Affordable Care Act. Insurers can't turn people down or charge them more based on their medical history.

But Bloechl, now 31, didn't know much about health insurance back in December of 2016 when he was shopping for that health plan in Chicago. So when the broker told him a UnitedHealthcare Golden Rule plan would cover him for a year for less than his ACA marketplace plan — "Unless you like throwing money away, this is the plan you should buy," he recalls the agent saying — he signed up.

A month later Bloechl was diagnosed with stage 4 non-Hodgkin's lymphoma after an MRI showed tumors on his spine.

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When Sam Bloechl was diagnosed with stage 4 non-Hodgkin's lymphoma a few years ago in the Chicago area, he and his wife Megan learned his insurance plan wasn't governed by Affordable Care Act rules. It wouldn't pay for treatment he needed. / Megan Bloechl

To Bloechl's dismay, he soon learned that none of the expensive care he needed would be covered by his new health plan. Instead of a comprehensive plan that complied with the ACA, he had purchased a bundle of four short-term plans (with three-month terms) that provided only limited benefits and didn't cover preexisting conditions.

Because they tend to look less expensive up front, short-term plans continue to find buyers, and they have been championed by the Trump administration (which has loosened restrictions on them) as an alternative for consumers.

With this year's open enrollment period for health insurance well underway, millions of people who don't get health insurance through their employer are looking for coverage on the federal and state marketplaces. Sometimes it's hard to tell the difference between comprehensive plans sold on the federal and state ACA exchanges and some plans available through other insurance websites and brokers that consumer advocates call "junk" plans because of their limited benefits and their coverage restrictions.

"These plans continue to proliferate," says Cheryl Fish-Parcham, director of access initiatives at Families USA, a consumer health care advocacy organization. "People need to be careful, whether they're buying by phone or on a website."

Bloechl assumed he was buying a comprehensive plan that would cover him for a life-threatening illness, although at the time he had no inkling he was sick. But when doctors said Bloechl needed a stem cell transplant, Golden Rule denied the request.

The reason: He had visited a chiropractor for back pain before he bought the plan. Bloechl had blamed his pain on the heavy lifting that came with running his landscaping business. But Golden Rule argued that he had sought medical treatment for what turned out to be a preexisting condition — cancer — so the plan didn't have to cover it. It didn't matter that he hadn't been diagnosed with cancer when he purchased the plan.

The insurer didn't cover any of his other cancer-linked bills for chemo and radiation either. Bloechl appealed the decision, but his appeals failed. He had more than $800,000 in bills for care — and that's before the stem cell transplant he desperately needed.

"It's just disgusting that these companies expect Joe Schmo or a guy like me to interpret [these policies] and then get screwed in the end," Bloechl says.

UnitedHealthcare refused to discuss this case with KHN unless Bloechl signed a statement waiving his right to privacy. But he tells KHN he does not feel comfortable signing a legal document provided by the insurer.

"Our agents work with individuals to help them understand their health insurance options and select a plan that best meets their needs," said UnitedHealthcare's communications director, Maria Gordon Shydlo, in an email. "We inform each individual of their coverage options, including associated costs, network size and if the selected plan covers pre-existing conditions. We adhere to a stringent application process that helps ensure consumers understand the plan they are purchasing before they make a final decision."

Consumer advocates have long sounded alarm bells about short-term plans and others that don't comply with the Affordable Care Act rules — rules that require plans to provide comprehensive benefits to all comers, regardless of their health. The ACA also prohibits annual or lifetime dollar limits on coverage for any plan sold on the federal or state health insurance exchanges.

ACA-compliant plans can also be purchased outside the marketplace, however, and that's where shoppers may run into trouble. thinking they're buying comprehensive coverage when they're actually buying something much more limited.

"It's a little bit of the Wild West out there," says Sabrina Corlette, a research professor at Georgetown University's Center on Health Insurance Reforms. "We often get calls about these products, and sometimes it can be challenging to figure out what they even are."

Short-term plans have garnered much attention in recent years. In 2017, the Obama administration limited their duration to less than three months to discourage people from relying on these limited plans for primary coverage rather than as a temporary coverage bridge for people switching plans, as intended. But these plans were championed by the Trump administration as a cheaper option for consumers, and it issued a rule in 2018 that permitted short-term plans with terms of up to 364 days, with an option to renew for up to 36 months. The rule requires short-term plan materials to explain that the plans are not comprehensive insurance and may not cover some medical costs.

Such plans can be appealing to healthy people who don't expect to need medical care. But as Bloechl's experience shows, life can throw curveballs.

"Our patients are often young and healthy," says Ryan Holeywell, senior director of advocacy communications at the Leukemia & Lymphoma Society.

Some states restrict or even prohibit the sale of short-term plans on the individual market.

But these short-term plans are just the tip of the iceberg.

There are fixed indemnity plans that pay out a certain amount — $100 a day for a limited hospital stay or $150 for an OB-GYN visit, for example — that may not come close to covering the actual costs.

Accident and critical illness plans provide lump-sum cash benefits when people experience medical emergencies like a heart attack or stroke under certain circumstances.

Cancer-only plans may provide hospitalization coverage but not cover other services. "You may be treated with chemo and radiation but never go to the hospital," says Anna Howard, a policy principal at the American Cancer Society's Cancer Action Network. "So, the policy may never pay out."

Then there are bundled plans that combine options, such as a short-term plan along with a prescription drug discount card and cancer coverage.

Unfortunately, consumers can't always rely on insurance brokers to give them accurate information or steer them to comprehensive coverage, as Sam Bloechl discovered.

In August, the federal Government Accountability Office published a report about the experiences of "secret shoppers" who called 31 health insurance sales representatives and asked about plans, saying they had preexisting conditions such as diabetes and heart disease. In more than a quarter of cases, the sales reps "engaged in potentially deceptive marketing practices," the report found, including falsely claiming that drugs such as insulin were covered, or offering a plan that didn't cover preexisting conditions.

One reason brokers might encourage consumers to buy non-ACA plans: higher commissions.

"In our survey of brokers, they do report [the non-ACA plans] pay higher commissions than ACA plans," Corlette says. Some brokers reported they avoid noncompliant plans, however, because they pose risks for consumers.

The National Association of Health Underwriters, an organization for health insurance and employee benefits professionals, did not respond to a request for information and comment.

Consumers can be sure they're getting a comprehensive, ACA-compliant plan if they buy it from marketplaces set up by that health law, Howard says.

Brokers can help people understand their options and buy a plan, including plans that comply with the ACA. But picking a broker can be challenging.

"Ideally go to someone in a brick-and-mortar building who has to bump into you in the grocery store," Corlette advises.

After his experience with Golden Rule, Sam Bloechl decided his best option was to offer a group plan to workers at his small landscaping company that he could also enroll in. He worked with a different broker, and he had lawyers look over the policies he was considering. He wanted to be sure that whatever plan he bought would cover his stem cell transplant.

The new plan did cover it. And by the time he went to the hospital to work out payment on his $800,000-plus bill, his income had declined so much because of his illness that he qualified for charity care. The hospital wrote off his bill.

His cancer is in remission.

But the experience with the short-term policy still rankles. "Charity care picked up the one bill and [UnitedHealthcare Golden Rule's] competitor paid for the transplant," Bloechl says. "They got off the hook without paying a dime."

Kaiser Health News is a nonprofit, editorially independent program of the Kaiser Family Foundation and is not affiliated with Kaiser Permanente.

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