Response to Deceptive Marketing of Limited Plans Shows States Can Take Proactive Steps to Protect Consumers

On April 26, 2022, the Texas Department of Insurance issued a consent order dissolving Texas-based Triada Assurance Holdings, operating under the name Salvasen Health. Salvasen did not hold a license to sell insurance in any state, but had marketed and sold their fixed indemnity plans to 65,000 consumers nationwide. While fixed indemnity (where the plan pays a fixed amount per service) is not considered minimum essential coverage (MEC) under the Affordable Care Act (ACA), Salvasen advertised that their plans met MEC requirements and covered benefits that in fact they did not. Following numerous consumer complaints and investigations in several states, Salvasen voluntarily terminated all plans as of March 31, 2022, prompting several state based marketplaces (SBMs) and the Center for Medicare and Medicaid Services to open special enrollment periods for affected customers. While Salvasen is not the first company to market limited coverage, their deceptive practices and state responses provide a useful case study for how to mitigate harm to consumers who are victims of misleading and deceptive marketing.

Bad actors are still marketing inadequate coverage to consumers, and they are difficult to track          

The fixed indemnity plans sold by Salvasen Health are just the latest example of companies marketing scant coverage as primary health insurance. Tactics used by insurers and brokers to create the perception of primary coverage include falsely advertising that the plan is “ACA-compliant,” has a large network, or meets MEC.  While some marketing tactics may be unethical but technically legal, others clearly fall afoul of state or federal laws prohibiting deceptive marketing. Others still constitute outright fraud, effectively collecting premiums from consumers for coverage that does not exist. The so-called “plans” marketed by Salvasen appear to fall into this category.

In the case of Salvasen, although the company was not a licensed insurer in any state, it marketed plans in multiple states that it claimed offered comprehensive coverage. For example, one Salvasen plan, the “Wellness 360,”  promised benefits including access to a large network of doctors, low-cost urgent care visits, and prescription drug coverage. In reality, plan enrollees reported that the company failed to pay claims, leaving them with large bills. There have also been reports of Salvasen coverage being sold to consumers searching for ACA-compliant plans despite the products failing to meet the ACA’s requirements for comprehensive coverage, such as covering pre-existing conditions or limiting annual out-of-pocket costs. Salvasen enrollees have also reported a failure return phone calls or otherwise communicate with them regarding claims. The company appeared to use a number of broker intermediaries, shell websites, and unstaffed phone lines that not only made it difficult for consumers to obtain help, but made it more difficult for insurance regulators to track down the perpetrators of the fraud.

Several Sates were able to quickly help impacted consumers

States began warning consumers of deceptive marketing related to Salvasen in November 2021, when Massachusetts called the company out in a Consumer Alert about unlicensed carriers that had generated consumer complaints. Wisconsin ordered a cease and desist against Salvasen in January 2022. Salvasen also faced pressure from several state departments of insurance (DOIs) to cease operations following the company’s decision to self-report compliance issues in June 2021. The company agreed to voluntarily terminate all plans as of March 31, 2022.

As of late 2021, Salvasen had 39,000 active policyholders, many of whom became uninsured following the termination of their plans. Several state-based marketplaces (SBM) were able set up a temporary special enrollment period (SEP), allowing consumers who had enrolled in Salvasen plans to obtain expedient access to subsidized, ACA-compliant insurance (CO, KY,  MA, MN, and NV). Generally, SEPs are only available in a defined set of circumstances, such as when consumers lose access to minimum essential coverage (which does not include fixed indemnity plans).

This is not the first time states running their own marketplace have used their flexibility to increase access to coverage. In 2020, almost every SBM opened a SEP in response to COVID-19, while the Trump administration declined to open a similar SEP on the federal marketplace.

Lessons for States

The deceptive marketing of Salvasen plans and subsequent state responses to protect consumers who purchased these products provide lessons for DOIs and consumer groups who monitor the marketing and sale of inadequate coverage.

Consumer education is increasingly important

As agents and brokers target consumers through deceptive marketing and misleading information, consumer education is increasingly important. Providing consumers with common warning signs, publicizing action taken against bad actors, and sharing examples of interactions that raise red flags can aid consumers who meet a potential bad actor while looking for comprehensive health insurance.

Proactive monitoring and consumer assistance programs can help catch bad actors early

While in business, Salvasen offered very little information on their own website and used brokers and other intermediaries to market their products (marketing materials rarely mentioned the company by name.) This made it difficult for consumers or regulators to catch that Salvasen was an unlicensed company. Furthermore, many consumers are not aware that they can call their state DOI when there is a problem, meaning that DOIs may not know of fraudulent practices in their states for quite some time. Proactive monitoring can help to catch bad actors that may not be immediately apparent, or unearth information that may not be easily accessible to the public. Online forums such as Better Business Bureau and Reddit provided an indicator that Salavsen plans were not paying claims or responding to enrollees’ complaints. In addition to monitoring these types of websites for reports of fraudulent activity, DOIs should conduct their own public awareness campaigns to encourage affected consumers to come forward. They should also assess and improve their own online and telephonic consumer assistance resources to make it easy to submit complaints. In the case of Salvasen, DOI investigations in response to consumer complaints and the company’s own self-reporting of compliance issues played a key role in pushing the company to cease operation

 SBMs give states the flexibility to help targeted consumers gain new coverage

States that operate SBMs were able to quickly establish SEPs to help consumers defrauded by Salvasen enroll in comprehensive coverage, potentially with premium tax credits. This is a big advantage over states that do not have SBMs. There, consumers had to wait for CMS to open a SEP on the federal marketplace, which opened in late April and runs through June 9. These states did have the ability to take other actions, like issuing cease and desist orders for Salvasen/Triada to stop the sale of their plans.

Takeaway

Salvasen Health will not be the first or last company to target vulnerable consumers with false claims that they are selling comprehensive health insurance. The multi-state effort to uncover Salvasen as an unlicensed actor and exert pressure to get these products removed from the market underscores the importance of states using their authority to monitor markets, shut down bad actors, and help consumers find and enroll in insurance coverage that can meet their health needs and protect them financially.