Navigator Guide FAQ of the Week: What Are the Risks of Buying Off-Marketplace?

Open Enrollment in most states ends in just about two weeks, on December 15. While consumers are weighing their coverage options, we know that affordability is top of mind. Consumers who are ineligible for the Affordable Care Act’s (ACA) tax subsidies might want to look outside of the marketplace for slightly better deals on health plans. While doing so, however, consumers should be wary of what they might find. We’ve collected a number of frequently asked questions (FAQs) from our Navigator Resource Guide on how to spot junk plans.

If I buy an individual health plan outside the health insurance marketplace, is my coverage going to be the same as it would be inside the marketplace?

Not necessarily. While plans sold through the health insurance marketplace must be certified by the marketplace as meeting minimum coverage and quality standards, plans sold outside the marketplace need not be certified. There are some health plans sold outside the health insurance marketplace that are required to provide the same basic set of benefits as plans sold inside the marketplace, are not allowed to exclude coverage of a pre-existing condition, and are also required to provide a minimum level of financial protection to their consumers. You should contact your state’s Department of Insurance for a list of reputable brokers who can direct you to these off-marketplace plans, but make sure to ask whether the plan provides the same protections as plans sold inside the marketplace.

There may be other coverage options available outside of the marketplace that are not required to provide the Affordable Care Act’s protections as described above. These include plans that are not traditional health insurance products, including short-term, limited duration insurance, association health plans, health care sharing ministries, and farm bureau plans. If an insurer or entity cannot provide a Summary of Benefits and Coverage that indicates the coverage is Minimum Essential Coverage, be aware that the plan may have coverage limitations, particularly for pre-existing health conditions or for basic medical care.

An agent offered me a policy that pays $100 per day when I’m in the hospital. It’s called a “fixed indemnity plan.” What are the risks and benefits of buying one? 

A fixed indemnity plan is not traditional health insurance and enrollment in one does not constitute minimum essential coverage under the ACA. These companies are supposed to provide policyholders with a notice that the coverage is not minimum essential coverage. Historically, fixed indemnity policies have been income replacement policies, to help compensate people for time out of work. The plan will provide a fixed amount of money per day or over a set period while the policyholder is in the hospital or under medical care. The amount provided is often far below the patient’s actual costs. Thus, consumers can find that they pay more in premiums than they get in return. Consumers who suspect that a fixed indemnity plan is falsely advertising itself as health insurance should report the company to the state department of insurance.

What are health care sharing ministries? What are the risks and benefits of signing up for one?

It is important to understand that a health care sharing ministry (HCSM) is not health insurance and will not provide the kind of financial protection you can obtain through a health plan on the health insurance marketplace since there is never a guarantee that you will reimbursed for your medical bills. Typically, HCSMs operate by having all of their members pay a monthly “share” or fee. Those fees are then used to pay other members’ medical bills, if they qualify and if the reason for needing care was not due to “un-Christian” behavior.

HCSMs do not have to comply with the consumer protections outlined in the ACA, and many states have exempted them from the state’s insurance laws. As a result, consumers could be at greater financial risk in these programs than they would be in traditional insurance. In particular, if there’s a dispute between you and the heath care sharing ministry about covered benefits, or if you’re having trouble getting your medical bills paid, many state insurance regulators do not have jurisdiction to help you.

Is an insurer allowed to ask me about my health history?

In general, if a plan offers the Affordable Care Act’s protections, an insurer should not require you to answer questions about your health history when you are applying for a plan. A navigator or broker may ask about your health history to guide you to the most appropriate plan offerings, and no plan offered on the Affordable Care Act’s marketplace through HealthCare.gov will require you to answer such questions.

If you are purchasing a plan outside of the marketplace and an application requires you to answer questions about specific health conditions, or asks you to check a box to release your medical records, you may be applying for a plan that will charge you more or limit your coverage based on pre-existing health conditions. These plans do not provide the Affordable Care Act’s protections guaranteeing coverage to people with preexisting conditions and setting limits on out-of-pocket costs. Ask a reputable broker (you can find one by contacting your Department of Insurance) to look at the plan details and proceed with caution, especially if purchasing a plan online or over the phone.

Bottom line: Even if it looks like a duck and walks like a duck, read the fine print!

Health insurance scams are at an all-time high. After the Trump Administration loosened restrictions on short-term limited duration health plans, association health plans, and increased traffic away from healthcare.gov to third-party direct enrollment sites, the onus of ensuring enrollment in a comprehensive, legitimate health plan is on the consumer. Marketing and sales tactics of many non-ACA compliant health plans can be aggressive, confusing, deceptive or in some cases part of an outright fraud. Consumers should know that the only surefire way to guarantee that they are buying comprehensive, ACA-compliant health coverage is through Healthcare.gov. If shopping outside the marketplace, be sure to ask clear and direct questions to make sure that you are buying ACA-compliant individual market insurance that covers pre-existing conditions and the ACA’s minimum essential benefits.

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