To the wealth of issues confronting the insurance industry with the new Trump Administration, we can add the old and established concerns about deceptive advertising. Using the Massachusetts law prohibiting unfair and deceptive acts or practices (UDAP), Attorney General Maura Healey recently reached a settlement with health insurer United Life Insurance Company (ULIC) for offering plans that did not meet federal and state coverage requirements. Channeling the unfair competition aspects of the UDAP law, Massachusetts accused ULIC of "siphoning consumers out of the Massachusetts health insurance market" by deceptive claims about the breadth and cost of its short-term medical insurance policy.
The complaint alleged a mixture of violations stemming from traditional deceptive claims to failure of the plans to live up to statutory requirements. In the realm of traditional advertising compliance, Massachusetts accused ULIC of deceptively marketing that its plans covered mental health treatment and provided prescription coverage, as well as misrepresenting plan costs. Further, Massachusetts alleged that agents of ULIC falsely claimed that they were connected with the Massachusetts Health Connector Authority and that their plans were half the price of competitive plans but offered similar coverage.
Allegations of Failing to Live up to Coverage Requirements
As to ULIC's failure to live up to the Massachusetts statutory requirements for coverage, the Attorney General made several allegations. As a preliminary matter, the Attorney General claimed that ULIC sold its plans without first filing them with the Massachusetts Division of Insurance and securing the approval of the Commissioner of Insurance. Further, the Attorney General claimed that the plans failed to include coverage for mental health, maternity and diabetes services. ULIC's plans were alleged to exclude consumers due to preexisting medical conditions, and also to deceive consumers into thinking they were securing plans that satisfied state and federal mandates for insurance.
The Settlement: Requirements, Lessons and Issues
The settlement will require ULIC to come into compliance with Massachusetts law for health insurance plans offered in the state. Most dramatically, however, ULIC will have to make payments totaling more than $2.8 million dollars: $450,000 for penalties to the Massachusetts Attorney General, $15,000 for costs and $2.3 million to make whole consumers who had been denied payments for the shortcomings in coverage that the Attorney General identified.
This settlement is a reminder that traditional notions of deceptive claims apply in any consumer- facing industry, even one as heavily regulated as healthcare. A common truism of deceptive advertising is that the first victim of a deceptive claim is the competitor who did not engage in that type of advertising. Attorney General Healey's complaint alleging that ULIC siphoned off healthy consumers is indicative of the central purpose of UDAP law—to ensure a fair marketplace for both consumers and competitors.
Of course, given the current political climate, this settlement naturally raises issues that will be at play in the coming debates over healthcare policy. In the press release for this case, Attorney General Healey stated that:
Recently revived federal proposals to take away our state's longstanding authority to oversee sales of health insurance will leave consumers and families more vulnerable to exploitation and create a 'race-to-the-bottom' that will raise prices and reduce access to quality healthcare for those in need.
During the Obama years, many Republican attorneys general brought policy-based suits against the federal government asserting states' rights issues. Many have predicted that Democratic attorneys general may emulate those practices, particularly if the Trump Administration and Congress pursue federal reforms, such as interstate sales of health insurance and federally certified association health plans (AHPs), that preempt state law and tie the hands of state regulators.
At a time when the Trump Administration is pursuing major changes to the Affordable Care Act that would return more responsibility for health insurance regulation to the state level, there may even be bipartisan opposition to AHPs and other federal preemptions of state consumer protection laws. Indeed, the National Association of Insurance Commissioners (NAIC) has consistently opposed AHPs, interstate sales and other federal preemption on a bipartisan basis.