More on the ACA Insurance Fraud Scheme

Been lucky to have Andrew Sprung of xpostfactoid writing on the topic of perpetrators conceiving, executing, and expanding their carefully planned scheme of large-scale unauthorized plan-switching amongst ACA healthcare insurance subscribers. In the end, people switched over to other plans get lesser healthcare insurance than what they had signed up for initially with a different plan. The plan switch generates a bonus for the person selling a plan and making the switch. Fraud would be the descriptor for this.

TrueCoverage and Enhance Health were using “leads” developed by Minerva Marketing using online ads misrepresenting ACA premium subsidies as cash benefits. And of course, people see the word money go with the flow thinking they will come away better off for lower premiums. Except the policy is not the same, neither are they with legit Enhanced Direct Enrollment platforms and they are bilked and left with inadequate plans and billing.

New light on the ACA agent scandal

The amended complaint in a putative class action suit alleges that dozens of health insurance agencies were involved in unauthorized plan-switching.

On August 16, the plaintiffs in a putative class action suit alleging large-scale agent fraud in the ACA marketplace filed an amended complaint. It considerably elaborates the narrative of how the alleged perpetrators conceived, executed, and expanded their scheme of large-scale unauthorized plan-switching, in which agents allegedly assigned themselves as Agent of Record (AOR). This occurred on hundreds of thousands of existing accounts and switched enrollees into new plans without the enrollees’ consent, sometimes repeatedly.

Below, I flag some noteworthy new allegations in the amended complaint, as well as questions suggested by those allegations.

Quick catch-up: the suit’s core allegations

Now, as to new facts alleged and new questions raised by the amended complaint.

Scale

What the amended complaint does add is a claim that TrueCoverage and Enhance Health recruited or created 80 downline agencies between them, 59 of which are named, all but two of them doing business principally in Florida. These agencies allegedly fed on leads generated by fraudulent ads, used the upline agencies’ dishonest phone scripts (e.g., deflecting questions about the alleged cash benefit), enrolled or planned-switched clients via the proprietary EDEs, and switched one another’s AORs multiple times for the same client (allegedly as many as 20 times), suggesting that plan switches may have far outnumbered enrollees affected.

The still-unknown scale of fraud also raises the question of what share of all unauthorized plan-switching and enrollment that occurred throughout the 32 HealthCare.gov states might have been generated by parties alleged in the suit to have colluded with TrueCoverage and Enhance. One possible tea leaf on that front:

an executive at an insurer with significant market share in one of the targeted states (mostly states that have not expanded Medicaid and other poor southern states) tells me that in the roster of customers seeking reinstatement after alleged unauthorized plan-switching, about 15% were enrolled via BenefitAlign. That struck this executive as a high percentage, since almost all EDE enrollments previously had been via HealthSherpa, the dominant EDE. Still, 15% is just . . . 15%.

Do some or even most of the downlines cited in the amended complaint use HealthSherpa as opposed to BenefitAlign, Inshura, or Jet Health? One indirect hint in the amended complaint: Enhance Health allegedly bought its own EDE, Jet, so it could stop paying TrueCoverage for use of BenefitAlign. HealthSherpa, on the other hand, is free to agents.

The Bain of the ACA marketplace?

The original complaint named as a defendant was Bain Capital Insurance. Bain is a part of private equity behemoth Bain Capital, which invested $150 million in Enhance Health in November 2021, seeking to build an agency focused on Medicare Advantage sales.

The amended complained elaborates on the alleged complicitly of Bain Capital Insurance and the centrality of Bain’s capital to propagating the fraudulent methods and practice. According to the amended complaint, Enhance Health was losing money as a Medicare Advantage agency. Its CEO Matt Herman was in danger of losing his job. A friend heading a different agency alerted him in July 2022 to the potential for high-volume ACA marketplace sales at low incomes (after enhanced ACA marketplace subsidies had rendered benchmark silver coverage free to enrollees with low incomes in March 2021 and CMS had instituted year-round enrollment and allowed monthly plan switches at low incomes in early 2022). This friend re-acquainted Herman with the CEO of Minerva Marketing (Brandon Bowsky) who was pioneering ads and leads and deceptive sales scripts aimed at low-income targets. The complaint alleges that Bain fully backed Enhance’s pivot to ACA sales, oversaw its operations, was aware of its sales methods, and fueled its propagation of the methods in hopes of effecting a quick and profitable sale of the company. In particular:

To increase Enhance Health’s profitability and its attractiveness for potential buyers, Bain Insurance bankrolled Enhance Health’s purchase of Jet Health, an EDE Platform, in July 2023. When Enhance Health transferred to Jet Health’s platform in November 2023, it instantly became more profitable, no longer having to pay Speridian for the use of Benefitalign. This purchase occurred well after Bain Insurance learned that Enhance Health’s ACA model was built around leads generated from fraudulent ads and AOR-swapping and plan-switching (p. 82).

While TrueCoverage was upline from Enhance Health, and according to the complaint has more downline agencies, the allegations about Enhance Health’s seminal role and Bain’s conscious backing, if true, suggest that ACA marketplace brokerage, and therefore the marketplace itself, may be one more healthcare industry segment disfigured by private equity.

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A note on how unauthorized plan-switching and enrollment works

Unauthorized plan-switching and new enrollments received major stimulus from the enhancements to marketplace premium subsidies created by the American Rescue Plan and implemented in March 2021, which rendered benchmark silver plans free to enrollees with incomes up to 150% of the Federal Poverty Level (FPL). Plan-switching received further stimulus from a rule implemented in early 2022 that provided applicants in states using the federal exchange with income below 150% FPL (the threshold for free silver coverage) with access to a Special Enrollment Period (SEP) in any month of the year — that is, they can enroll year-round, and change plans monthly. (16 of the 19 state-based marketplaces (SBMs) have implemented this SEP as well.)