Kreidler took action against Aliera and its partner, Trinity Healthshare, Inc. (Trinity) in May 2019 after an investigation revealed that since August 2018, the companies sold 3,058 policies to Washington consumers and collected $3.8 million in premium. Trinity agreed to Kreidler’s order.
“Aliera and Trinity promised to provide people with coverage when they needed it only to leave consumers with huge medical bills,” said Kreidler. “I’m taking action today to send a message to all scam artists – if you harm our consumers, you will pay heavily.
“Shopping for health insurance can be very stressful – especially if you have to worry about being ripped off. True insurance companies have to meet rigorous standards before they can sell coverage to consumers. These companies are hiding behind a federal and state exemption that exists for legitimate health care sharing ministries and using it to rake in profit across the country on the backs of vulnerable consumers.”
Aliera, an unlicensed insurance producer in Washington, administered and marketed health coverage on behalf of Trinity HealthShare. Trinity represents itself as a health care sharing ministry.Such ministries are exempt from state insurance regulation only if they meet statutory requirements. If so, they do not have to meet the same consumer protections guaranteed under the Affordable Care Act. This includes providing coverage for anyone with a pre-existing medical condition.
A legal health care sharing ministry is a nonprofit organization whose members share a common set of ethical or religious beliefs and share medical expenses consistent with those beliefs.
Kreidler’s office has received more than 20 complaints from consumers. Some believed they were buying health insurance without knowing they had joined a health care sharing ministry. Many discovered this when the company denied their claims because their medical conditions were considered pre-existing under the plan.
“Real health care sharing ministries can offer a valuable service to their members,” Kreidler said. “Unfortunately, we’re seeing players out there trying to use the exemptions for legitimate ministries to skirt insurance regulation and mislead trusting consumers. I want these outfits to know we’re on to them and we will hold them accountable.”
Sold insurance without a Washington insurance producer license.
Represented an unauthorized insurer, Trinity.
Operated an unlicensed discount plan organization.
Kreidler’s investigation into Trinity found that it failed to meet key federal and state requirements:
Trinity was formed on June 27, 2018, without any members. Federal and state laws require that health care sharing ministries be formed before Dec. 31, 1999, and their members to have been actively sharing medical costs.
What it’s like to stay alive as the virus charts its fatal course through a home for the elderly in one of the worst-hit neighborhoods in the Bronx.
When someone in the building died, a notice was often taped to a window in the lobby: “WE REGRET TO ANNOUNCE THE PASSING OF OUR FRIEND….” The signs did not say how or where the friend had died, and because they were eventually removed, they could be easy to miss. In March, as these names began to appear more frequently at Bronxwood, an assisted living facility in New York, Varahn Chamblee tried to keep track. Varahn, who had lived at Bronxwood for almost a year, was president of its resident council. Her neighbors admired her poise and quiet confidence. She spoke regularly with management, but as the coronavirus swept through the five-story building, they told her as little about its progress as they told anyone else.
Some residents estimated that 25 people had died — that was the number Varahn had heard — but others thought the toll had to be higher. There was talk that a man on the second floor had been the first to go, followed by a beloved housekeeper. An administrator known as Mr. Stern called in sick. Around the same time, Varahn noticed that the woman who fed the pigeons had also disappeared.
The New York State Department of Health advises adult care facilities to inform residents about confirmed and suspected COVID-19 cases. But inhabitants of Bronxwood said they were kept in the dark. In the absence of official communication, it was difficult to sort out hearsay from fact. “I was told that it was 42 people,” said Renee Johnson, who lived on the floor above Varahn. “But honestly we don’t know. They are not telling us anything.” When for a couple of weeks Renee herself was bedridden — fatigued and wheezing — there were rumors that she, too, had passed away.
Because so many people were missing, and no one knew where they’d gone, life began to feel like a horror film. The dining room, once an outlet for gossip and intrigue, was shuttered and the theater room padlocked. Staff covered the lobby in tape, as if it were the scene of a crime. The library began filling up with the possessions of those who had vanished: their televisions and computers, their walkers and bags of clothes.
It seemed like a good omen when a few residents came back from the hospital grinning, having faced the ordeal and lived to tell about it. “I wouldn’t even say to them, ‘I thought you were dead,’” Varahn said. “I was just happy to see them.” But then she spotted these survivors in the lobby or going out shopping and worried that the sickness would continue to spread.
The virus was taking the worst toll in the Bronx, and Bronxwood sat within the borough’s hardest-hit ZIP code, although it would be weeks until anyone would know this. But by April, it was clear that elderly Black and brown people with preexisting health conditions, living in crowded housing in the city’s poorest neighborhoods, were among those most susceptible. That many of Bronxwood’s residents belonged to this demographic did not escape anyone there.
When Varahn arrived at Bronxwood in the summer of 2019, she was 65 and still worked at two salons. She hadn’t been planning to move to an assisted living facility, but she was desperate to find an affordable room. She had been sharing a ground-floor apartment with her 28-year-old son in Allerton, a working-class neighborhood in the Bronx, before her landlady pushed her out to make space for her grandchildren. Friends told Varahn she should have taken the matter to court, and maybe she could have, but she believed that things happened for a reason.
In the brick vastness of the east Bronx, with its towering apartment blocks and modest duplexes, Bronxwood’s cream-and-beige exterior stood out. The building was just a 20-minute walk up the street from her old apartment, so she didn’t have to worry about missing her clients, her church sisters or the kids she mentored, who called her Mother V. Her benefits covered the $1,270 rent, which included three meals a day and housekeeping. The shared bedrooms — crammed with two twin beds, two stout night tables, two wardrobes and two wooden dressers — were small, but Varahn didn’t think she’d spend much time in hers.
On the first floor, which housed the recreation and meeting rooms, there was always something to do. Staff threw holiday parties and monthly birthday celebrations. Visitors came by to help with knitting and coloring and computer lessons. There was Uno, Pokeno and afternoon bingo. On Wednesdays, members of the cooking club prepared Cornish hens, fish and chips, liver with onions. In the afternoon, bands would perform — classical and jazz, calypso and merengue — and some of the singers were quite talented.
Not long after Varahn moved in, she met Glenda King at a Bible study group. Glenda, who is 68 and has lived at Bronxwood for over seven years, wears square transition lenses and tucks her gray hair into a prim, low bun. Dryly self-deprecating, she considers herself an introvert who has the misfortune to live in a building with 270 other people. She makes a point of being friendly, even though she likes to say that she has no true friends.
At first, Glenda found Varahn to be reserved, but she soon realized that what she had mistaken for detachment was simply Varahn’s way of taking in her new surroundings. Varahn knew how to draw people out and listen to their problems. She had worked as a beautician since high school, first at flagship boutiques in the city and later for the disco diva Carol Douglas and on the sets of Spike Lee films. Her clients felt comfortable confiding in her, and before long, so did the residents of Bronxwood. “I can go up and talk to her about anything,” Glenda told me. “Her forte is humility.”
All adult care facilities are legally required to maintain a forum where residents can independently discuss their living conditions, but some resident councils, like Bronxwood’s, are more active than others. Although Varahn was new to the building, people encouraged her to run for president. She would bring an unusual amount of political experience to the council: She had previously served as vice chair of the Allerton Barnes Block Association and as president of both the neighborhood merchant’s group and a charity society at her church. Under her bed, she stored the plaques from various luncheons that had celebrated her civic advocacy.
After Varahn’s victory in the September elections, Glenda, who had worked for many years as a typist, took on the duties of council secretary, and Hurshel Godfrey, another longtime resident, assumed the vice presidency. Every month, the council gathered in the main lobby, which fit about 60 people, some of them perched on their walkers. Varahn, who has a broad, serious face and a sleek bob, dressed for the occasion in crisp two-piece suits with lapels. She worked to cultivate a shared sense of purpose. “I never said I could do something, even if that was true,” she said. “I always emphasized that we could do it together.”
One of the first things Varahn noticed that fall, as the weather grew colder, was how few residents had proper winter clothes. Some explained that they were stuck indoors because they lacked coats. Old men shuffled around in flip-flops in the rain. In the annual grant application for extra state funding, Varahn secured a bigger clothing allowance — $200 per resident — and a double-oven stove for the communal kitchen. She brought in educational speakers for Veterans Day and Black History Month, and planned field trips to go out dancing and to the casino. “Varahn had a lot of connections,” Hurshel said. “I knew a few people, but she knew a lot.”
Some of the local politicians Varahn was acquainted with started asking her if she had ever considered running for higher office: The City Council elections were coming up in 2021. In February, she started riding the subway to midtown Manhattan to take a class for first-time candidates. Former campaign managers shared tips on electoral strategy and the best kind of eye contact to make with large crowds. Maybe, she thought, electoral politics was her calling.
At this point, the virus was said to be on the other side of the world. It hadn’t yet surfaced in a nursing home in Kirkland, Washington, or in New Rochelle, just a short drive up the road.
Until the 1980s, elderly Americans with medical needs had limited options: They could age at home with family or aides, or they could “park and die,” as the saying went, at a nursing home.Assisted living facilities emerged as a third way, rejecting the clinical strictures of a medical institution in favor of a more informal, dormlike setting.
In the last four decades, demand for assisted living has soared. The paradigm promises residents the freedom to live autonomously — and operators freedom from regulation. Unlike nursing homes, assisted living facilities are not subject to federal oversight. The standards for care — along with the definition of “assisted living” — vary greatly from state to state (and from facility to facility).
During the pandemic, these freedoms have become liabilities. “If infection control was limited and regulation was already ineffective in nursing homes, it’s almost nonexistent in assisted living,” said David Grabowski, a professor of health care policy at Harvard Medical School who studies long-term care for older adults. “It’s all the problems we are talking about with nursing homes, but even more so. There’s less regulation, far less staffing and many of the residents are just as sick.” The population in assisted living often closely resembles that of nursing homes, yet there are no requirements that the former provide full-time medical staff. In New York, according to government data, half of those in assisted living are over 85, two-thirds need help bathing and a third have Alzheimer’s or some other form of dementia.
At Bronxwood, the state’s third-largest adult care facility, residents said that employees initially lacked protective gear as they cleaned dozens of rooms. As in other homes in the city at the start of the outbreak, shared bathrooms and group meals made it difficult to isolate. And because it is not a medical institution, residents continued to enter and leave the building as they’d always done. (Neither Bronxwood nor Daniel Stern, an administrator, responded to repeated requests for comment.)
Less than 1% of Americans reside in long-term care facilities — a category that includes nursing homes and assisted living residences — but these facilities account for around 40% of the country’s COVID-19 deaths. Researchers caution that this figure represents an undercount. Many states do not publish this data, or do so incompletely, and fewer than half of all states report cases in assisted living facilities, according to research by the Kaiser Family Foundation. “As a result,” the analysis said, “it is difficult to know the extent to which residents and staff at assisted living facilities have been affected by COVID-19 or the extent to which interventions are urgently needed.”
The way that New York counts deaths has been controversial from the start. That’s because the state’s Health Department will not attribute a death to a residential health care facility unless the death occurs on the premises. The unusual policy has baffled residents and their family members, along with lawmakers and health care experts. “This is a really big hole in New York state data,” Grabowski said. “If someone lives for a long time in a nursing home, it makes no sense that their death is then attributed to the hospital rather than the nursing home.” Without a proper count of cases and deaths, advocates argue, officials cannot direct scrutiny or resources to afflicted homes.
For more than two hours at a hearing in August, legislators repeatedly pressed the state health commissioner, Dr. Howard Zucker, for the number of deaths that could be traced back to residential health care facilities. His answers did not satisfy his interrogators. “It seems, sir, that in this case you are choosing to define it differently so you can look better,” said Gustavo Rivera, the state Senate Health Committee chairman, whose district includes part of the Bronx. “And that’s a problem.”
Gov. Andrew Cuomo has boasted about the relatively low death toll in the state’s nursing homes, despite the fact that no other state counts these deaths as New York does. As of mid-November, there have been more than 6,619 virus-related deaths within the state’s nursing homes and 179 in its adult care facilities, according to official data. Bronxwood, however, has never appeared in that tally.
“The public list is incomplete and misleading,” said Geoff Lieberman, the executive director of the Coalition of Institutionalized Aged and Disabled, an organization that advocates on behalf of adult home residents in New York City. “Either everyone at Bronxwood died at the hospital, or the information isn’t being accurately reported.” Before the August hearing, Lieberman and his colleagues at CIAD interviewed residents at 28 adult homes in New York City, including Bronxwood, and tallied around 250 deaths from their accounts — a stark contrast to the 53 deaths that facilities had self-reported to the state. Bronxwood employees likewise sounded the alarm: In April, six staff members told local news that by their count more than a dozen residents had died.
Residents played detective, too. In May, when the U.S. death toll hit 100,000, Renee Johnson tried to match the names she saw in the newspaper to those of her missing neighbors. “We lost a lot of friends,” she said. “And you’re scared — you’re really scared — because you don’t know if you’re next.”
Jonah Bruno, a spokesman for the Department of Health, defended New York’s approach to counting COVID-19 deaths in residential health care settings. “The Department goes to great lengths to ensure the accuracy and consistency in our data reporting,” he wrote in an email. Bruno did not disclose how many residents died in the hospital after falling ill at Bronxwood, but he noted that the facility passed an infection control survey in May. “Since the start of this pandemic,” he added, “we have made protecting the most vulnerable New Yorkers, including those in adult care facilities, our top priority.”
Slowly and then all at once, everything that had made Bronxwood bearable was taken away. Residents were discouraged from seeing one another, going outside or congregating in common areas. Visitors were banned. Whenever people lingered downstairs or smoked out on the patio, staff ushered them back to their rooms.
Varahn hung posters in the lobby to try to boost morale. The first gave the administration and staff five hand-drawn stars and thanked them “for caring during COVID-19.” “WE ARE ALL IN THIS TOGETHER,” read the second, on which she had colored an American flag. Some residents thought their president was doing the best she could, given the circumstances. Others were offended. They didn’t want to thank anyone: They were miserable.
Deborah Berger, who lives on the fourth floor, likened the new regime to living in a giant day care center. Glenda said she felt like a puppy in a doghouse. Renee compared it to jail.
The analogies were ready at hand, but what was harder to express was how little trust they had in the institution tasked with protecting them. “Nobody is talking to us,” Renee said. “The staff just say: ‘Go to your room. Go to your room.’ There’s no feelings. There’s no nothing.”
Glenda washed her hands until she felt as if they were going to fall off. She wiped everything down with bleach — door handles, dresser, windowsill. She had a weak left lung, and she was terrified. “If I get one hit of that coronavirus,” she liked to say, “I’m not going to make it.” When her legs got stiff from sitting, she paced up and down her cappuccino-colored hallway, about the length of a city block. Other times, wearing a surgical mask, she wheeled her walker downstairs, though the state of affairs there could be disappointing. A lot of residents didn’t wear masks. They huddled around the TV and crowded in the elevator. People were getting complacent. “Not me,” Glenda said.
The council had suspended its meetings, but toward the end of April, several residents approached Varahn to report that Bronxwood was not giving them their stimulus checks. In fact, complaints about missing or partial stimulus checks were so widespread throughout the city’s facilities that the state issued a guidance: Residents’ money belonged to residents. Varahn convened an impromptu meeting with the council’s leadership in the stairwell — the only somewhat quiet place in the building — to strategize about what to do.
Hurshel, the vice president, was planning to ask about his check. “Don’t ask,” Varahn coached him. “Say, ‘I came here to get my money and I’ll cash it myself.’” Glenda noted that people with dementia might not remember the existence of the checks in the first place, so she knocked on doors to remind them.
Part of Varahn’s role as president was to relay these and other concerns to Mr. Stern. They had an easy, playful rapport. Sometimes, he asked what an intelligent woman like her was doing living in a place like this. The question flattered her, but it also unsettled her, as if she wasn’t wanted or didn’t belong.
People talked about leaving Bronxwood almost as soon as they arrived, but the truth was that they were there because they had nowhere else to go. The elderly are typically steered to places like Bronxwood after a stay in the hospital. They have taken a fall or needed a surgery, and while they’re recovering, lose their apartment. Others, like Glenda, are recommended by a caseworker at a shelter. It’s not uncommon for such homes to hire recruiters to help fill their beds.
While many assisted living facilities cater to a wealthy clientele, who pay out of pocket, Bronxwood primarily serves low-income seniors. (It is, technically speaking, an adult home with an assisted living program.) Most residents sign over their supplemental security income to pay for the room and board — and out of that sum the facility gives them a $207 “personal needs allowance” each month. The money runs out quickly, since it often goes toward phone bills, toiletries, transportation and more nutritious food.
Out of Bronxwood’s 270 or so residents, more than half are enrolled in its assisted living program, whose costs are covered by Medicaid. In theory, the program offers an extra level of care to those who need it. In practice, it functions as a “huge financial boon” to the adult home industry, said Tanya Kessler, a senior staff attorney with Mobilization for Justice, a legal services organization. Bronxwood can charge Medicaid between $78 and $154 per enrolled resident each day, depending on his or her needs. But Kessler said there’s little oversight into whether this additional funding results in additional care. Bruno, the spokesman, said that the Health Department conducts regular inspections of assisted living programs “to ensure all applicable laws, regulations and guidelines are being followed.”
Healthier residents at Bronxwood told me that they seemed to be roomed with those who were more infirm, effectively placing them in the role of an extra aide. “One of the big complaints we hear is, ‘I’m not well myself, but they put this person in here that they expect me to look after,’” said Sherletta McCaskill, who, as the training director of CIAD, helps adult home residents organize councils and independent living classes. “It speaks to the lack of services that these homes are providing.” The most recent audit by New York’s Office of the Medicaid Inspector General found that Bronxwood had overbilled Medicaid by $4.4 million in 2006 and 2007. (Bronxwood requested an administrative hearing to challenge the findings, according to an OMIG spokesperson; the date is pending.)
In the pandemic, everyone’s escape plans, loudly discussed yet endlessly deferred, took on a new urgency. Residents told Varahn that they were joining the city’s long wait list for subsidized senior housing, or that a son or daughter was coming to rescue them. Faye Washington, who was 68 and lived down the hall from Glenda, tried to compile a list of senior housing options in the Bronx. “You know why I want to get out?” Faye said. “Because when all those people passed away, it killed me.”
Faye told Glenda, “I’m taking you with me.” But Glenda was not in any hurry. It was safer, she felt, to be where an aide could hear if she called for help. She had heart problems, anxiety, memory loss and chronic fatigue. Her family had asked her to stay with them, but she did not want to babysit relatives. As she saw it, if God had wished her to have more children, he would have let her keep getting her period.
Varahn’s family urged her to leave as soon as possible, even if it meant losing a month of rent. But where would she go? Varahn wondered. And then what would she do? The lady who lived across the hall had gone to see her daughter in Georgia, and now she was stuck there while all her things were here.
As the lockdown dragged on, Varahn felt herself sliding into a depression. Before March, she was always out with a client or at some community meeting. Now she was eating three meals a day on a rectangular folding table at the edge of her bed. She was gaining weight from staying inside. Her feet were swollen. Her back hurt.
She started taking walks, sometimes just a few blocks, to relieve the pain. The soccer field across the street, where kids played on Saturdays, was empty. Many of the stores on White Plains Road, Boston Road and Allerton Avenue, including the salons, were closed until further notice, and some days it felt like the entire world was at a standstill.
At other times, she wasn’t isolated enough. Her roommate rose at dawn and sold loose cigarettes throughout the day. People were always stopping by. Whenever Varahn was on a call or at a virtual meeting, the roommate muttered under her breath or cursed sarcastically. Once, the noise was so disruptive to the class that the instructor told Varahn to mute herself, which she found humiliating. What would have been merely an inconvenient pairing in normal times had under quarantine become an oppressively intimate arrangement. There was also the problem of Varahn’s older sister, Childris, whose heart was starting to fail. The grief put a constant pressure on her days. All this made it hard to concentrate, and she soon fell behind on her studies. So many things about her path to the City Council were uncertain now anyway. Was a person of her age expected to knock on doors? Would she have to campaign through a computer screen?
Varahn began searching for a way to reclaim her freedom. She asked Mr. Stern for a room of her own. As far as she could tell, there was plenty of space in the building. A private accommodation could double as a little office for the council, she reasoned — somewhere that residents could feel comfortable speaking to her. But management never acted on her request. Victoria Kelley, a former jazz singer who had lived at Bronxwood for three years, suspected that Varahn’s battle for the clothing allowance had turned administrators against her. Such retaliation is not unheard of, according to advocates who work with residents at adult care facilities. “If you don’t have someone on the council to fight for you, nothing gets done, but Varahn did fight,” Victoria told me. “Some of the naysayers got jealous.”
With the arrival of spring, a different approach revealed itself to Varahn. First she rented a car, so she could get around more easily. Bright flowers fringed the patio, and slender trees cast ragged patches of shade on the sidewalk. Her errands had been piling up, too. She needed to buy cases of bottled water, pick up her son’s stimulus check from her ex-landlord, haul her sheets to the laundromat after her roommate got bedbugs.
Then she started driving for the pleasure of it, humming along to power ballads on Christian radio and chatting on the phone with friends. She found herself going through the boxes in her U-Haul storage unit, making a mental inventory of all the things she didn’t have space for at Bronxwood, like her slow cooker, her turkey roaster, her Ashley Stewart outfits, her dance costumes. One weekend, a few FOR SALE signs caught her attention. That was when she realized what was happening: She wanted out.
It was a complicated undertaking. Most apartments were too expensive, which is why she hadn’t been able to get one in time last year. And even if she was lucky enough to find something affordable, she would have to keep working — perhaps, if salons weren’t allowed to reopen, somewhere that wasn’t a salon. Then again, she didn’t want any of the residents to feel that she was leaving them behind.
One morning toward the end of July, Glenda’s cellphone rang. The sound surprised her, because she had stopped paying the bill. When Glenda called the number back from the room’s landline, it turned out to be Varahn, who announced that she was moving out the next day and promised to stop by in September “to pass the torch.” Glenda told Varahn she was happy for her, and she was. But she wished her friend had let her know sooner. Hurshel, the vice president, was unable to step in, because he, too, had just left. After five years on the city waitlist for affordable housing, he’d finally landed a new spot. It was less than a block away from Bronxwood. “You have to get out of there,” he warned his old friends.
That same week, Bronxwood laid off employees without warning, apparently because of the declining number of residents. There was no longer an aide for the fourth floor, according to three people who lived there, and there was no one to speak up about it. “I feel stripped naked, like we’re getting ready for the slaughterhouse,” Glenda said the next day. We were sitting down the street, and as staff trailed out of the building at the end of the afternoon shift — a long procession of teal and navy scrubs — some of them were wiping away tears. “Right now, the administration can say anything goes.”
Glenda knew she did not want to serve as president, even in an interim capacity, and asked Renee, a former president, what to do. Renee was telling everyone who had asked her this question the same thing: She didn’t have a clue. “We’re so lost right now,” Renee said to me in August. Her bingo crew had dwindled from more than 15 players to fewer than 10. She was pessimistic about the prospects for a socially distanced election: “We don’t even know who is dead or alive.”
Varahn had implied to Glenda that she was staying in the Bronx. In reality, she was moving to suburban Maryland. She had signed the lease for a one-bedroom apartment in a senior living community just a short drive away from her daughter’s house. It was everything that Bronxwood was not: serene and quiet, lush with greenery.
She had told Glenda only half of the story because she couldn’t quite believe her good fortune. “I feel so sorry because some of them are waiting there thinking that they will someday get an apartment,” Varahn said. “If it wasn’t for my associations” — the support from her family, her earnings from the salon — “I would be stuck there, too.”
Her family was relieved about her departure, but Varahn remained uneasy. With a room of her own, she thought, or even a different roommate, she probably would have stayed. As it was, the likely return of the virus in the winter frightened her.
When she packed up her belongings, she felt as if she were packing up the future she had once imagined for herself. “By now, I would have been running for City Council, if this virus didn’t happen,” she said. “So I’m saying to myself, well, you know, that wasn’t in God’s plan.” Though she kept her move a secret, one resident spotted her carrying boxes in the hallway and asked her, “Are you just going to leave us like that?” It was the same question she had been asking herself for months.
In a handwritten letter Varahn gave to Bronxwood’s administrators before she left, she expressed her desire to remain president from afar until it was safe to hold an election. She had planned to retire there, the letter said, yet it was impossible to do so under the current circumstances. She expected Mr. Stern, or at least his secretary, to call to offer his regrets, but she never got a response. It made her feel as though nothing she had done at Bronxwood mattered — as though she had never lived there at all.
Schools that are choosing to reopen amid the coronavirus pandemic are attempting to protect themselves against possible legal blowback with legal liability waivers.
From universities to K-12 districts, some schools are sending forms with titles such as “Assumption of Risk” and “Waiver of Liability” to fend off any lawsuits should students contract coronavirus on campus or in the classroom.
“Institutions are basically trying to have it both ways,” Kevin McClure, associate professor of higher education at the University of North Carolina Wilmington, told Yahoo Finance. “They’re trying to say: ‘We are opening in the midst of significant risk, and at the same time we want you — as students or faculty or staff — to assume that risk and to not hold us responsible for the decisions that we’ve made.’”
‘Students’ ability to take responsibility both for themselves and each other’
Generally, the waiver forms note two things: That there is a risk of contracting the coronavirus if a student appears on campus and that the decision to come back cannot be held against the school.
“I know the challenge these circumstances present, but I also know our students’ ability to take responsibility both for themselves and each other,” Damon Sims, vice president for Student Affairs at Penn State, said in a press release. “If ever there was a time for them to do so, now is that time. We will do all we can to encourage that outcome, and we expect them to do all they can to make it so. We are in this together.”
Students returning to Penn State’s University Park campus, which usually houses more that 45,000 undergraduate students, are required to fill out the following “coronavirus compact” prior to their arrival on Penn State’s campus
‘This is the reality of the current situation’
Saint Anselm College in New Hampshire is another college asking its students to sign a waiver.
The liberal arts school is planning to conduct its fall semester primarily in-person, an option 30% of schools have chosen. Classes start for 2,000 students on August 19, university spokesperson Paul Pronovost told Yahoo Finance.
Aside from the usual safety measures — from reducing density in housing, classroom, and common spaces, restricting visitors, implementing distancing — the school is also going to administer two coronavirus tests on students upon their arrival: A rapid test and a fuller test. Saint Anselm is also planning to do surveillance testing throughout the semester.
Beyond social distancing, testing, and contact tracing, the university wants students and parents to “accept” the unique schooling situation.
There’s “simply no way for the College – or any College or institution, for that matter – to guarantee that our campus will not see cases of COVID-19,” Pronovost said in an email. “We believe it is important for students and families to understand and accept that this is the reality of the current situation.”
The liability waiver notes that students “forever release and waive my right to bring suit against Saint Anselm College, its Board of Trustees, officers, directors, managers, officials, agents, employees, or other representatives in connection with exposure, infection, and/or spread of COVID-19 related to taking classes, living or participating in activities on the Saint Anselm College Campus.”
Nearly 80 education groups sent a letter to congressional leaders back in May, stating that reopening schools involves not just “enormous uncertainty about COVID-19-related standards of care” but also the “corresponding fears of huge transactional costs associated with defending against COVID-19 spread lawsuits.”
Rutgers Law Professor Adam Scales argued that we may see an uptick in litigation, at least “until Congress or the courts firmly signal that COVID is not going to be ‘the new asbestos,’” adding that courts will not likely impose severe liability on public entities like schools.
“Just because a student can get into court does not mean the student can win,” Michael Duff, a law professor at the University of Wyoming, told Yahoo Finance. “So even if the waiver does not ‘work,’ and the student can get into court, there is no guarantee that a lawyer would take the case because the case may be weak.”
There is also the issue of proof.
“The idea that liability — whether caused by negligence or gross negligence — is easy to prove is a myth,” Duff said. “The student would first have to prove that the college did not act ‘reasonably’ in the COVID-19 context.”
Given that the definition of acting “reasonably” would not necessarily involve a college being perfect with its coronavirus mitigation, Duff added, gross negligence would be “a very hard thing to prove.”
At the same time, Scales added, a liability waiver could not serve as a “get-out-of-jail-free card” a school taken to court in a coronavirus-related case brought by a student.
‘A stark dilemma’
At the end of the day, McClure noted, colleges need students to return to campus and pay tuition to survive as institutions of higher education.
“I do genuinely believe that many institutions and the people running them want to do what’s right and keep people healthy,” McClure said. “On the other hand, there are the financial realities of attempting to keep an organization up and running, and an organization whose revenue is often very much tied to people coming to campus.”
Schools are thus faced with “a stark dilemma,” McClure added, of either bringing students and faculty back to campus or “make significant cuts because we are not able to pay our bills.”
That said, given that students are paying a lot more today than previous generations in terms of tuition and fees, there is a sentiment that “institutions actually have a greater duty of care to their students.”
That idea is being put to the test amid the coronavirus pandemic, McClure said, and the liability waivers — which essentially abandon the “duty of care” that these institutions should take — fly in the face of this “consumerist moment” in higher education.
“Anytime that you’ve got people that are forking over large amounts of money and making a significant investment,” McClure said, “you can expect that they’re going to want a certain level of service and are going to be unhappy when a company or an organization isn’t delivering their end of the deal.”
It was a bold claim when President Trump said that he was about to produce an overhaul of the nation’s health-care system, at last doing away with the Affordable Care Act, which he has long promised to abolish.
“We’re signing a health-care plan within two weeks, a full and complete health-care plan,” Trump pledged in a July 19 interview with “Fox News Sunday” anchor Chris Wallace.
Now, with the two weeks expiring Sunday, there is no evidence that the administration has designed a replacement for the 2010 health-care law. Instead, there is a sense of familiarity.
Repeatedly and starting before he took office, Trump has vowed that he is on the cusp of delivering a full-fledged plan to reshape the health-care system along conservative lines and replace the central domestic achievement of Barack Obama’s presidency.
No total revamp has ever emerged.
Trump’s latest promise comes amid the outbreak of the novel coronavirus, which has infected millions, caused more than 150,000 deaths and cost Americans their work and the health benefits that often come with jobs. His vow comes three months before the presidential election and at a time when Trump’s Republican allies in Congress may least want to revisit an issue that was a political loser for the party in the 2018 midterm elections.
Yet Trump has returned to the theme in recent days.
“We’re going to be doing a health-care plan. We’re going to be doing a very inclusive health-care plan. I’ll be signing it sometime very soon,” Trump said during an exchange with reporters at an event in Belleair, Fla., on Friday. When a reporter noted that he told Fox’s Wallace that he would sign it in two weeks, Trump added: “Might be Sunday. But it’s going to be very soon.”
Trump’s decision to revive a health-care promise that he has failed to deliver on — this time with less than 100 days before Election Day — carries political risks. Although it may appeal to voters who don’t like the ACA, it also highlights his party’s inability to come up with an alternative, despite spending almost a decade promising one.
It also raises questions about what exactly his plan would look like and whether it would cover fewer Americans than the current system as the pandemic ravages the country.
Nonetheless, some of Trump’s allies said floating health-care ideas is a smart move by the president.
Sen. Lindsey O. Graham (R-S.C.), who regularly meets and golfs with the president, said the health-care plan that Trump has referred to would come in the form of an executive order that Graham called “fairly comprehensive.” However broad, an executive order would fall short of a full legislative overhaul.
Graham said what Trump has in mind now would ensure that consumers do not risk losing their health plans if they get sick, but he did not give details.
“He’s pretty excited about it,” Graham said of the president. The ACA’s consumer protections for people with preexisting medical conditions is one its most popular facets with the public, and it is the one part of the law Trump consistently says he would preserve if he could get rid of the rest. How he could do that while containing costs after he and congressional Republicans remove the law’s requirement that everyone has to purchase health insurance remains the question.
Graham said it is politically astute for the White House to present an alternative to Democratic proposals close to the election, including the idea of Joe Biden, the party’s presumptive nominee, to build on the ACA so that more people could get coverage.
Still, senior Republican aides on Capitol Hill who are steeped in health care said they had little knowledge of any White House planning for a comprehensive replacement of the ACA.
The White House did not offer details or parse the president’s terminology, which has included saying that the forthcoming plan would be a bill. That implied legislation rather than an executive order.
“President Trump continues to act in delivering better and cheaper health care, protecting Americans with preexisting conditions, lowering prescription drug costs, and defending the right of Americans to keep their doctors and plans of their choice,” White House press secretary Kayleigh McEnany said in a statement to The Washington Post.
McEnany pointed out that Trump issued four executive orders in late July intended to lower prescription drug prices. “There will be more action to come in the coming weeks,” she said without identifying any.
On Capitol Hill, the president’s promises of health plans and legal efforts by the administration to scrap the ACA have created dilemmas for some Republicans. Of the GOP senators facing competitive races this fall, only Susan Collins (Maine) has said that she opposes the Justice Department’s decision to back an effort to gut the law in the courts. Other Republicans have struggled to answer directly, walking a tightrope between embracing a position that would go against popular provisions in the health-care law and risking the wrath of conservatives who want Obamacare repealed.
And the pandemic has also only sharpened the relevance of health care in the eyes of voters — increasing Republican anxiety about doing anything that could limit coverage ahead of the election. Republican Sens. John Cornyn (Tex.), Dan Sullivan (Alaska), Steve Daines (Mont.) and Martha McSally (Ariz.) — all on the ballot this November — this past week drafted legislation that would provide assistance through COBRA for people who lose their employer-sponsored health care as jobs continue to vanish during the pandemic.
“I think there’s definitely things we need to do,” Cornyn said. “But I think our focus ought to be on giving people more choices.”
The ACA — politically polarizing throughout the decade it has existed — is favored by a slim majority of Americans. A Kaiser Family Foundation survey in July found that 51 percent support the law while 36 percent oppose it. A Fox News survey in June showed 56 percent support and 38 percent opposition.
For Trump, saying that he is about to produce a health-care plan to replace the ACA has become a recurrent mantra of his presidency.
During his 2016 campaign, condemning the law was central to Trump’s candidacy. During that campaign’s final days, Trump said he was so eager to repeal and replace the 2010 law that he might ask Congress to convene a special session to do it.
“It will be such an honor for me, for you and for everybody in this country,” the then-Republican nominee said, “because Obamacare has to be replaced. And we will do it, and we will do it very, very quickly.”
The ACA was a significant theme of the president’s joint address to Congress just over a month into his tenure. “Tonight I am calling on this Congress to repeal and replace Obamacare,” he said, calling for measures that would “expand choice, increase access, lower costs and, at the same time, provide better health care.”
With GOP majorities in both the House and the Senate, Congress devoted much of 2017 to trying to get rid of substantial parts of the law. But a succession of repeal bills ultimately faltered in the Senate. When the last one did, Trump said nothing.
Near the end of the year, Congress took one big whack at the health law. As part of a major change in tax law, it eliminated the penalty the ACA levied on most Americans if they failed to carry health insurance. The penalty’s end neutralized the law’s insurance mandate.
With little appetite after that among Senate Republicans to continue trying to gut the law, and a Democratic House majority a year later, the momentum for replacing the ACA fell back to the Trump administration. Cabinet departments have, by turns, undercut specific parts of the law and tried to have it invalidated in the courts, while emphasizing that their concern for the nation’s health-care system and America’s patients reaches beyond the ACA.
And the president? He has continued to periodically vow that he would come up with a better health plan.
In the fall of 2017, Trump took a major swipe at the law by ending payments to insurance companies that had helped them afford to offer lower-income customers discounts on their deductibles and other out-of-pocket costs, as the ACA requires.
During 2018, health officials sought to shrink the law in several other ways. They wrote rules that gave states greater latitude in defining a set of 10 “essential health benefits” that the ACA requires many health plans to cover. They widened the availability of short-term health plans — originally intended as bridge coverage when someone was, say, between jobs — that do not meet consumer protections or benefits that the law otherwise requires.
The administration has joined with a group of Republican attorneys general who are pursuing a lawsuit, now before the Supreme Court, that contends the entire ACA is unconstitutional. At first, the Justice Department argued that only part of the law is invalid, but the administration hardened its position to argue that the entire law should be thrown out.
As these and other administration health-care actions have played out, the drumbeat has continued that the president was about to reveal an ACA replacement plan.
In June 2019, Trump said in an interview with ABC News that he would announce a “phenomenal” new health-care plan “in about two months, maybe less.”
Two months later, White House counselor Kellyanne Conway told reporters that the president was preparing to introduce an elaborate plan to redesign the nation’s health-care system in a speech the following month. “We’re working every single day here,” Conway said last August. “I’ve already been in meetings this morning on the president’s health-care plan. It’s pretty impressive.”
No speech or plan came.
In June, Health and Human Services Secretary Alex Azar suggested that the administration would develop a health-care plan only if the nation’s highest court, which has upheld the law in two earlier cases over the past eight years, overturns it this time. “We’ll work with Congress on a plan if the ACA is struck down,” Azar said on NBC’s “Meet the Press.” “We’ll see what the Supreme Court rules.”
That was three weeks before the president told Fox that he was about to issue a plan.
The administration’s antipathy toward the law has not produced much real-world change for the approximately 20 million people who have coverage through the insurance marketplaces the ACA created for those who cannot get affordable health benefits through a job and those insured through Medicaid expansions.
Early on, HHS slashed federal funding for advertising and other outreach efforts to encourage people to buy ACA health plans during the annual enrollment period. Critics of the administration predicted that sign-ups would ebb. They have not.
The most recent enrollment figures document the number of people choosing an ACA health plan who had followed up by paying insurance premiums last winter so their coverage was in place as of February. The figures, released last week, show that 10.7 million consumers have such plans, slightly more than the 10.6 million a year earlier.
Despite the administration’s steps to undercut parts of the law, and the elimination of the penalty for not having insurance, some of the ACA’s main features remain in place. They include federal subsidies for more than 8 in 10 people who buy health plans in the marketplaces created under the law, the expansion of Medicaid in most states, many consumer insurance protections, and a rule that young adults can stay on their parents’ insurance until they turn 26.
Against existing evidence, Trump says that will soon change.
“We’re getting rid of it because we’re going to replace it with something much better,” Trump told Wallace two weeks ago.
The coronavirus pandemic hit the nation hard and fast, infecting Americans from coast to coast, overwhelming health care systems and wreaking havoc on the economy. Those with pre-existing conditions – like diabetes and cardiovascular disease – are more vulnerable to the deadly virus. Americans have higher rates of these chronic conditions than other countries, in part because so many people live without health insurance or have shoddy coverage. This has become increasingly worse over the last four years as underlying health coverage has shrunken for the virus’s hardest hit victims: Black Americans, Native Americans and people of color.
Of the hundreds of thousands of Americans now recovering from COVID-19, many will undoubtedly have new chronic conditions, like lasting lung damage. This will be on top of the pre-existing conditions many who were predisposed to coronavirus already had. Record job losses in the wake of the pandemic have resulted in the loss of employer-sponsored coverage for more than 5 million Americans who are now on the hunt for new, affordable health insurance plans.
This presents the perfect storm for junk insurance plans – short-term limited duration insurance plans – that allow discrimination based on pre-existing conditions, expose consumers to financial risk and provide inadequate coverage. STLDIs are more dangerous now than ever in our new COVID-19 reality. Let’s be clear: These junk insurance plans – touted by the Trump administration and supported through taxpayer dollars – are not the answer. It is time for our leaders to put back the limitations on how long they can be used.
As their name suggests, short-term limited duration plans are meant to be used temporarily to bridge short-term gaps in coverage that arise from a job loss or other extenuating circumstance. However, new federal rules under the Trump administration have allowed the coverage period of STLDI plans to expand from six to 12 months. The administration has also promoted these plans to states as being eligible for federal subsidies, meaning our tax dollars help pay for them. President Donald Trump himself has touted these plans for being more affordable than Obamacare, but that is because they lack the same protections and do not meet minimum essential coverage standards under the law.
That is what makes these plans so dangerous. Though they tend to be less expensive than Affordable Care Act plans, they leave consumers vulnerable to unanticipated out-of-pocket costs by offering bare-bones coverage. Unlike ACA plans, STLDI plans can exclude coverage for pre-existing conditions, do not cover the cost of prescription drugs, have annual or lifetime maximums on covered services, and are not required to cover preventive services like cancer screenings or maternity care.
The lower price tag may lure consumers suffering financially during the pandemic, but they are high risk for those who do not fully understand what they are buying. Without carefully reading the fine print, many may not know before purchasing that STLDI plans are exempt from ACA rules as well as regulations for insurers recently passed in the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security Act. We have already seen the pandemic exacerbate existing health inequalities in America, and now these plans expose consumers, especially low-income individuals and those with chronic conditions, to more discrimination and financial ruin.
The Department of Health and Human Services has already acknowledged that these plans fall short. In fact, the government is having to cover the cost of COVID-19 testing for people with STLDI plans, classifying them as “uninsured.” Yet, they will not cover the cost of COVID-19 treatment, meaning those with STLDI plans could face bills in the thousands of dollars, considering the average cost to treat a hospitalized coronavirus patient is $30,000.
Consumers for Quality Care, a coalition of advocates and former policy makers which provides a voice for patients in the health care debate, recently sent a letter to HHS Secretary Alex Azar and Centers for Medicare & Medicaid Services Administrator Seema Verma asking that they protect consumers from these dangerous plans.
This pandemic has laid bare how dangerously unprepared America’s health care system is for a large-scale public health crisis. People needed high-quality insurance coverage before coronavirus hit, and they will need it long after the pandemic subsides. Let this be a lesson to the Trump administration – it is time to stop backing junk insurance plans and remove them from the open market. If our leaders fail to act, the lives and financial well-being of millions of Americans are at stake.
Rep. Katie Porter recently received an explanation of benefits from her insurer saying that, in addition to the $20 co-pay she paid when she got her coronavirus test, she may be on the hook for an additional $56.60.
The catch: The law requires insurers to cover coronavirus testing without cost-sharing. Porter knows that because she voted for it.
Why it matters: Containing the coronavirus depends on knowing who has it, and it’s going to be much harder to get people to get tested if they think they’ll have to pay for it. But it’s becoming increasingly clear that patients may be vulnerable to surprise coronavirus bills.
Between the lines: Porter, who received a coronavirus test on March 23, has insurance through UnitedHealthcare and shared her explanation of benefits with Axios. Congress has required both the test itself and the associated care to be covered without cost-sharing.
In a statement, UnitedHealth Group said it has waived member cost-sharing for coronavirus testing and treatment.
“Some members received bills early on when there were not yet specific COVID-19 billing codes and during a period in which code adoption was first taking place,” the company said, adding that it’s waiving those charges and evaluating claims from earlier this year to make sure they were handled correctly.
“We are not authorized to talk about [Porter’s] specific situation without permission, however, what likely occurred is that her provider used the wrong billing code for the visit. To confirm if that’s the case and have it corrected, we encourage Rep. Porter to contact us so we can clarify with her directly.”
Yes, but: There’s a huge question of who should have to pay for coronavirus testing as it becomes more prolific, and many insurers — United included — have said that they’ll only cover tests that are “medically necessary,” at least without cost-sharing. It’s unclear who will pay for tests that aren’t deemed medically necessary.
The federal government hasn’t said who should pay for testing when, whether it be insurers, employers or the government itself. Insurers are questioning whether they should be on the hook for the hundreds of thousands of tests of asymptomatic people that public health experts say will need to be conducted every day.
Even though Congress has tried to resolve payment disputes between insurers and out-of-network labs,there’s a loophole that would allow patients to receive balance bills from out-of-network labs in some circumstances.
If a patient sees an out-of-network doctor for a coronavirus test, they’re vulnerable to receiving a surprise medical bill from this provider — just as they are under normal, non-coronavirus conditions, said Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy.
What they’re saying: “We will not be able to truly reopen and rebuild if Americans rightly fear costly medical bills for visiting their health care providers for coronavirus tests,” Porter writes in a letter to top Health and Human Services officials being sent today, asking the administration to implement the law more forcefully.
She also asked for “formal, explicit guidance for insurers, providers, employers like nursing homes and assisted living facilities, and testing companies, as well as all 50 states…to ensure patients and workers are not asked to pay any costs.”
One of the main goals of the ACA, sometimes referred to as Obamacare, was to provide affordable health insurance to every American.
The law’s passage in 2010 made it possible for nearly 54 million Americans—previously denied coverage due to pre-existing medical conditions—to purchase coverage, as well as landmark provisions to protect those who developed an expensive medical condition while insured from being unexpectedly dropped by their health plan.
By all accounts, such provisions helped a record number of Americans procure medical insurance coverage—and, by extension, reduce healthcare costs and avoid medical bankruptcies.
Yet, with the elimination of the individual mandate penalty in 2017, and other policy changes that have forced up the cost of premiums, many Americans are looking for options off the healthcare exchange.
One such option is the short-term limited duration insurance (STLDI) plan, loosely defined as bare bones medical coverage that can last up to 12 months with the potential for renewal. Managed Healthcare Executive® Editorial Advisor Margaret Murray, chief executive officer of the Association for Community Affiliated Plans (ACAP), said such plans “are not really insurance,”—and refers to them as “junk insurance.” With a new 2018 HHS rule that dramatically expands access to this type of coverage, she worries that their availability will hurt consumers.
“Insurance brokers may offer these plans to consumers and those consumers may not realize that they largely reverse ACA protections regarding pre-existing conditions and coverage limits,” she says. “These plans don’t cover what you think they will cover, the insurance companies can cancel your policy at any time, and they can deny your access to maternity care and certain drugs. It’s not really major medical insurance and it’s not always easy for your average consumer to see that.”
The Trump Administration contends, with rising insurance premiums, that such short-term plans make health insurance more affordable for the average American.
Cathryn Donaldson, a spokesperson for America’s Health Insurance Plans, a health insurance trade association, says such plans “can provide a temporary bridge for those who are going through a life transition or gap in coverage such as having a baby or changing jobs.”
Yet, Karen Pollitz, a senior fellow at the Kaiser Family Foundation, says STLDI plans embody the old adage about getting what you pay for. STLDI are not required to comply with many of the ACA’s most important protections, which means insurance companies can exclude coverage for pre-existing conditions, charge higher premiums based on health status, impose annual and/or lifetime caps, and opt out of coverage for things like maternity care or mental health treatment. They can also revoke coverage at will.
“Under the ACA, it used to be that short term and minimum essential coverage [MEC] policies had to have a prominent warning printed on the front place that said, if you buy this, you are not getting full coverage and may even owe a tax penalty,” she explains. “Those warnings are no longer there and that’s of concern.”
Furthermore, late last year, HHS put forth a final rule extending the duration of STLDI from a mere three months up to 364 days. In addition, insurers can offer renewals and extensions for up to three years. What is even more concerning, Murray says, is the current Administration is now actively promoting the use of private web broker sites to market STLDI. This can make it more difficult for consumers to understand which plans offer comprehensive medical coverage and which are the riskier STLDI plans.
“The current administration says such plans offer consumers more affordable options—and more choice,” Murray explains. “But the marketing for these plans is really disingenuous. It’s not just that they are just short-term. They don’t cover what people think they will cover. They are very profitable for insurance companies. But they can be very costly for consumers, who likely won’t realize they don’t have comprehensive coverage until they are sick or injured.”
Over the past few months, several high-profile publications like Consumer Reports and the Washington Post have printed stories about the dangers, and unexpected costs, of STLDI for consumers.
“It’s like you are in the market for a car and someone offers you a really affordable roller-skate,” says Pollitz. “But a roller-skate is not the same thing as a car. It’s not going to get you as far if you really need to travel. And it’s going to cost you more in the long run.”
Murray also cautions more widespread adoption of such plans can affect the entire insurance market, siphoning cost-conscious consumers from risk pools and driving up premium costs for everyone.
“There are always some young invincibles, who think they won’t get sick—and there are some invincibles, too—and they will be attracted by the lower premiums,” she says. “But in doing so, that will leave people who are sicker to pay higher rates by moving people out of the ACA marketplace.”
That’s one reason why ACAP, as well as six other health organizations, filed a lawsuit in the U.S. District Court for the District of Columbia on September 14, 2018 in order to roll back the new STLDI rule and stop the expansion of such plans. Murray said the HHS rule violates the ACA, “undercutting plans that comply” with the still active legislation. They argue the Trump Administration is using these new rules to try to overturn the ACA—which they have not yet been able to successfully repeal in Congress.
“We thought this was important enough that it was worth suing the federal government in order to try and stop it,” she says. “We had hoped to get a summary judgment last year because we wanted to stop the spread of STLDI plans for the 2020 open enrollment. Unfortunately, we didn’t get that. The judge ruled against us. But we are appealing it—and the hope is that we will have a decision to stop these things being sold in 2021.
The take-home message
Donaldson says it is vital the healthcare community educate consumers about the risks of STLDI plans and make sure they are better aware of what sort of comprehensive plans are available on the Healthcare.gov marketplace.
“While alternative plans such as association health plans and STLDI may present more affordable premiums, they are not a replacement for comprehensive coverage and may not cover the treatments or prescriptions an individual may need throughout the year,” she says.
“We understand that life happens and there may be all manner of reasons why you are separated from coverage,” she says. “But it is becoming harder and harder to distinguish these plans from real coverage especially now that they are now being aggressively marketed to people all over the country. And it’s vital that people understand that 90% of consumers will play less than the listed price on Healthcare.gov marketplace because they qualify for subsidies. It really does pay to take the time to look before you sign up for one of these short-term plans.”
The California Department of Justice denied a proposed merger between nonprofits Adventist Health System/West and St. Joseph Health System Oct. 31, stating it’s not in the public’s interest.
The transaction would increase healthcare costs and possibly limit healthcare access in Northern California, the department determined.
In June 2018, Roseville, Calif.-based Adventist and Irvine, Calif.-based St. Joseph requested to form a joint operating company to integrate 10 select facilities in Northern California. At the time, the systems said their integration would improve healthcare access, especially for vulnerable and underserved patients.
Sean McCluskie, chief deputy to California’s attorney general, disagreed with those predictions.
“The California Department of Justice is responsible for ensuring that any proposed sale or transfer of a nonprofit health facility protects the health and safety interests of the surrounding community. After careful review, we found this proposal falls short of protecting consumers,” he said.
In a joint statement to Becker’s, Adventist and St. Joseph expressed disappointment about the department’s decision.
“Our intent has always been to better serve our communities, increase access to services, and create a stronger safety net for families in Northern California,” they said. “At this time, our organizations will need to take a step back and determine implications of this decision. The well-being of our communities remains our top priority.”
Issue: The Affordable Care Act’s rule on minimum medical loss ratios (MLRs) protects consumers by capping insurers’ profits and overhead. In the early years of the law, these caps were rarely used because most insurers in the individual health insurance market experienced substantial losses. More recently, however, insurers are earning substantial profits while the individual market is rattled by regulatory uncertainty and change.
Goal: To understand the ongoing role that the medical loss ratio rule plays in the individual health insurance market.
Methods: Analysis of insurers’ financial performance 2015–2017, as reported to the federal government.
Key Findings and Conclusion: Consumer rebates under the MLR rule increased noticeably in 2017 as insurers raised rates and regained profitability. At the same time, the rule’s calculation of MLRs based on a three-year rolling average allowed insurers in 2017 to recoup a portion of their losses from earlier years. As the individual market continues to experience cycles of profits and losses, the MLR rule dampens the severity of these cycles, thus protecting insurers as well as consumers.
Regulation of insurers’ medical loss ratios (MLRs, or loss ratios) is one of the most notable consumer protections in the Affordable Care Act (ACA). The loss ratio is the percentage of premium dollars that insurers spend on medical claims and quality improvement, rather than dollars retained for administrative overhead and profit.
Under the ACA, insurers that do not incur a loss ratio of at least 80 percent (based on a three-year rolling average) in the individual or small-group market must rebate the difference to consumers.1Put another way, insurers with average overhead and profits during the past three years that exceed 20 percent must rebate the excess to members. Large-group insurers must do the same for loss ratios less than 85 percent, or when overhead and profits average more than 15 percent of premium dollars based on a three-year average.2
The ACA’s MLR rule took effect in 2011. In its first few years, this rule provided important consumer protection by requiring substantial consumer rebates and inducing insurers to reduce their administrative costs, which likely helped to keep premiums somewhat lower.3These protections became less visible once insurers adjusted their rates to reflect their lower overhead.4 Following substantial rate increases for individual health insurance in 2017 and 2018, however, the ACA’s loss ratio limits have renewed relevance by helping stabilize a market that has been buffeted by cyclical underpricing and overpricing.
This issue brief explains how the ACA’s MLR rule serves an important buffering function in two ways. The rule protects consumers by limiting how much insurers can attempt to recoup previous losses through higher profits in any one year. At the same time, the rule allows insurers to replenish some of their reserves that deplete during lean times by calculating MLR limits based on a three-year rolling average.
The Changing Relevance of Loss Ratio Limits
As shown in Exhibit 1, rebates in the individual health insurance market declined from almost $400 million in 2011 to slightly more than $100 million annually in 2015 and 2016,5 accounting in those later years for only about 0.14 percent of insurers’ premiums. Rebates also declined in the group markets but less dramatically (in proportionate terms).
To fully understand this pattern, it helps to have a clearer picture of insurance pricing during this period. The individual market had a significant drop in rebates after 2014 because loss ratios in that market increased to an unprofitable level for most insurers in 2015 and 2016. Insurers underpriced those years because of the highly competitive conditions in the newly reformed individual market, coupled with actuarial uncertainty over the full extent of health care needs for the newly insured.6
But since 2017, the ACA’s MLR limits have once again become more relevant for consumers in the individual market.7 To help insurers regain profitability, state regulators allowed them to target the minimum allowable loss ratios, which meant that rates increased more than the anticipated increases in medical claims. As a result, rate increases averaged roughly 25 percent in 2017 and 30 percent in 2018.8
For the most part, these increases were caused by changes in federal rules, such as the planned phasing out of the ACA’s transitional reinsurance program, as well as the unplanned cessation of cost-sharing reduction payments to insurers.9 But these hefty increases were also driven by insurers’ aiming to substantially lower their previous loss ratios.
In fact, many insurers overshot their targeted loss ratios in 2017 and 2018, resulting in greater profitability than they may have anticipated. Accordingly, their rate increases were much more subdued in 2019, averaging only about 3 percent.10
This cyclical pattern of underpricing followed by overpricing (relative to actual medical claims) is driven in large part by insurers’ uncertainty about the ACA’s evolving market conditions. This uncertainty has two causes: actuarial and political.11
When the newly reformed individual market first opened in 2014, insurers lacked the actuarial experience needed to accurately estimate the newly insured’s use of medical services. This actuarial uncertainty carried over into 2016 because insurers must file their rates roughly 18 months prior to the end of the following rating year.12 Also, in 2015 and 2016, there was substantial turnover among insurers in the individual market, as some initial players learned that they were not able to compete effectively under the new market rules.13
The ACA’s drafters anticipated this uncertainty and included several risk-mitigating measures, known as the “three R’s:” reinsurance, risk-adjustment, and risk corridors.14 The first two measures were implemented, but risk corridors were not because of Republican opposition that characterized this market-stabilizing measure as a “bailout for insurers.”15Risk corridors would have substantially dampened the initial cycling between substantial losses and excessive profits in the ACA’s individual market.16
Despite the absence of the ACA’s full complement of stabilizing features, participating insurers began to gain their actuarial footing in 2017. At this point, however, the cause of insurers’ uncertainty shifted from typical actuarial factors to more political factors, including dramatic changes in administrative policies and market rules under the Trump administration. These changes are described in more detail elsewhere, but in brief they include abruptly ceasing cost-sharing reduction payments, repealing the individual mandate penalty, and drastically reducing funding for marketing and consumer navigation during open enrollment.17
This political and regulatory uncertainty continues.Regulators are greatly loosening rules that previously had limited the sale of non-ACA-compliant policies, and the full impact of these changes is still unknown.18 Moreover, the Justice Department has taken the position in court that the ACA should be struck down as unconstitutional, which could have a catastrophic impact on the individual market. However, the fate and timing of that litigation is highly uncertain.
In short, these roller-coaster conditions would probably have leveled out by 2017 if ongoing changes to market rules had not intensified the uncertainty. Against this backdrop, we now consider the role that the ACA’s loss ratio rule might play in stabilizing the market by protecting both consumers and insurers through continuing cycles of losses and excessive profits that result from ongoing market uncertainty.
The following sections examine two key stabilizing features in the ACA’s loss ratio rule. Using a three-year rolling average to calculate excess overhead and profits protects insurers by allowing them to recoup at least a portion of their recent losses through somewhat larger rate increases in a current year. At the same time, requiring insurers to rebate excess overhead and profits protects consumers from unjustified price increases.
In effect, the ACA’s loss ratio rule serendipitously serves a function similar to the ACA’s risk corridor provisions that were undermined by Republican opposition: the MLR rule partially shelters insurers in bad times and keeps them from unduly profiteering in good times.
Protection of Insurers
Viewing the individual market as a whole, Exhibit 2 shows that in 2015 and 2016 (averaged together), insurers had poor financial results. Their collective loss of –7.4 percent was because of a high medical loss ratio — 95 percent. Some insurers were more successful and were required to pay a rebate; however, across the entire market, these rebates averaged only $6 per person per year (50 cents a month), equal to just 0.01 percent of the premium.
Insurers’ financial performance improved dramatically in 2017. By increasing premiums by 11 percent more than the increase in claims (14% vs. 3%),19 insurers reduced their medical loss ratios by nine percentage points overall, from 95 percent to 86 percent. And, by holding steady their administrative costs, their profit margins improved by 11 points, from –7.4 percent to 3.3 percent.
Because of this financial improvement, rebates increased by almost 50 percent in 2017. But rebates still remained much lower than in the ACA’s early years, averaging only $9 a person for 2017 ($0.73 a month) marketwide.
Rebates remained low for two reasons. First, although insurers’ MLRs dropped quite a bit, they remained above the regulatory minimum on average. Second, for insurers with 2017 loss ratios below 80 percent, their earlier losses in 2015–2016 decreased the rebate amount they owed because the rebate is calculated using a three-year rolling average.
This effect can be seen by examining insurers that were in the individual market all three years, 2015–2017. Out of 303 such insurers with at least 1,000 members, there were 74 insurers with loss ratios below the required 80 percent in 2017. Without the three-year rolling average, these more profitable insurers would have owed rebates averaging $258 per member in 2017. Instead, the ACA’s three-year look-back rule required insurers that were in the market that long to pay a rebate of only $21.55 per member for the year. This reduction allowed these insurers to recoup $919 million of prior 2015–2016 losses overall.
Protection of Consumers
At the same time the ACA’s MLR rule helps cushion the extent of insurers’ losses over time, it also continues to protect consumers against overpriced health plans. Although most insurers in 2017 owed no rebates, 29 insurers paid a rebate of $140 per member, amounting to $132 million, or 3.3 percent of their premiums. Not counting these rebates, these insurers had a handsome overall profit margin of 12.6 percent in 2017. As shown in Exhibit 3, these rebates reduced their profit margins by slightly more than 25 percent.
This backstop against excessive profits is expected to have even more importance once full financial reporting is complete for 2018, which included a second round of substantial rate increases.20 Despite owing rebates for 2017, insurers continued to increase rates for 2018 in part because they had to file their 2018 rates in mid-2017 without their complete 2017 financial performance data in hand. Also, insurers had to anticipate possible disruptions to the market caused by changes to the ACA’s market rules.
By building in more cushion than they needed, insurers are expecting substantially lower loss ratios in 2018, which will generate much higher rebates. One recent analysis projects that loss ratios in the individual market will drop to 70 percent for 2018, resulting in close to $1 billion in rebates.21
These consumer protections could have substantially more impact in some states than in others, depending on how much insurers were permitted to increase rates in each state. Across 50 states and the District of Columbia, insurers in 26 jurisdictions had no rebates for 2017 in the individual market, and rebates were less than $5 a person in 11 states. However, in seven states (Arizona, Massachusetts, Minnesota, Mississippi, Missouri, New Hampshire, and New Mexico), rebates exceeded $50 per person in the 2017 individual market.22Notably, in four of these seven states (Minnesota, Missouri, New Hampshire, and New Mexico), a single insurer with profit margins of 15 percent or greater was solely responsible for the rebate (Exhibit 4).
When the ACA’s medical loss ratio rule first took effect in 2011, its protections were more visible to consumers, who received significant rebates while insurers substantially reduced overhead costs. In subsequent years, these protections became less noticeable, as insurers in the individual market struggled with substantial losses.
Now that the individual market appears to have regained profitability, however, the ACA’s MLR rule has renewed relevance, both for consumers and insurers. The rule has resumed its important role of paying rebates to consumers whose health plans enjoy substantial profits. Additionally, the MLR rule affords insurers that suffer substantial losses an opportunity to recoup some of those losses by averaging a low loss ratio against two prior years of high loss ratios.
By smoothing out oscillations in profits and losses, the ACA’s MLR rebate rule holds the prospect of not only continuing to protect consumers, but also of helping to counter some of the destabilizing effects of ongoing changes in regulatory policy in the individual market.