When the Affordable Care Act (ACA) was passed in 2010, it was designed to give tens of millions of uninsured or underinsured Americans the healthcare coverage they desperately needed. Now, thanks to unscrupulous insurance brokers, an easily exploited system, and the risk of insurance lead scams, potentially millions of Americans may find themselves without insurance or on healthcare plans that don’t meet their needs due to unauthorized plan-switching.
In plan-switching, shady insurance brokers switch consumers’ insurance plans without their knowledge to collect commissions. Unauthorized switches can lead to everything from hefty tax bills to consumers finding their insurance plans have lapsed when they try to schedule a doctor’s appointment or fill prescriptions.
Continue reading as we explore the rise of plan-switching, how it impacts consumers, and what, if any, steps the federal government is taking to close loopholes that make insurance lead scams so lucrative.
What is Plan-Switching, and How Does it Work?
As the name implies, plan-switching is when an individual switches from one insurance plan to another. This happens all the time as families grow, insurance needs change, and workers begin getting insurance through their employers rather than the open market. However, due to the incentives insurance brokers receive for signing up consumers to new plans, many Americans are finding they’ve been switched without their knowledge or permission.
The commission structure for ACA plans incentivizes brokers to enroll and manage policies for clients because they earn money for each policyholder they sign up and maintain under their management.
Here’s how it generally works:
- Enrollment commissions. Brokers receive a commission for each policy they enroll a consumer in. The amount of the commission varies by the state, plan, and insurer.
- Monthly commissions. Most brokers receive a monthly commission for each active policyholder they manage. This means brokers get paid every month an individual remains enrolled in a policy.
- Switching plans. If a broker can switch a policyholder from a competitor’s plan to one they manage, they will begin to receive the monthly commission for the policy. They will also receive a commission on the sale of the new policy.
This commission structure encourages insurance brokers to enroll and manage as many policyholders as possible. Unfortunately for consumers, it’s incredibly easy for insurance brokers to switch their policies without their knowledge. This makes plan-switching a potentially lucrative scheme for dishonest brokers who are more interested in making money than helping people find the insurance coverage they need.
To switch a person’s policy, all a broker needs is their name, birthdate, and state of residence. Using this basic information, a broker can access a policyholder’s coverage through the federal exchange or direct enrollment platforms. They can then switch a consumer to a more expensive policy with a higher commission or to a lesser plan that doesn’t provide the coverage they require.
How Does Plan-Switching Impact Policyholders?
Having their healthcare decision made by a stranger who doesn’t have their best interests at heart can impact consumers in several profound ways.
Most significant is the loss of their healthcare coverage. Brokers can enroll policyholders in plans that expire or don’t roll over from year to year. Because they don’t anticipate needing to enroll in a new healthcare plan during the open enrollment period, many people have failed to meet ACA enrollment deadlines, leaving them without any option for insurance coverage until the enrollment window reopens the following year.
Policyholders can also end up in plans they didn’t choose but still have to pay the tax obligations. This happens when consumers are signed up for plans they don’t qualify for that include premium tax credits paid by the federal government to insurers.
Often, they end on these plans because brokers who want the commission on the policy misstate the policyholder’s income. Come tax season, the IRS realizes the discrepancy in the amount paid to the insurer on behalf of the policyholder and charges the consumer the difference. This can result in an unexpected bill for thousands of dollars.
Policyholders can also find their long-time doctors are not in their new plan after being switched, medication that was once covered by their insurance now costs more or is no longer covered, or that planned surgeries have to be canceled.
No matter the level of impact, plan-switching can be devastating for consumers, and the effects can be felt for years.
How Do Brokers Get the Personnel Info They Need to Switch Plans?
Some organizations use online and social media advertising to attract prospects, who then end up on lists that are sold to brokers or contacted directly by agents. While these lists are not illegal, the ads that generate them are often vague and misleading.
These advertisements often promise “subsidies” worth up to $6,400, suggesting that the money can be used for groceries, rent, or gas. They also sometimes mention “zero-dollar” health insurance.
However, these ads are deceptive because the so-called “subsidies” are actually premium tax credits available to many individuals enrolling in ACA plans based on their income. Rather than getting cash, the money goes to insurers to reduce the cost of the new plan, which the consumer might not have even wanted.
Consumers responding to these ads might not realize they relate to health insurance. When they contact a broker, they’re asked for basic information, such as their full legal name, birth date, and state of residence. Even if they don’t agree to change policies at that time, the damage is already done. The broker has all the info needed to switch their plans without their knowledge or permission.
What is the Government Doing to Crackdown on Insurance Lead Scams?
Fortunately, the federal government is taking reports of fraudulent health insurance leads seriously and has taken steps to eliminate this dangerous and fraudulent practice.
New Regulations
In June 2023, new rules were introduced requiring brokers to obtain policyholders’ written or recorded verbal consent before making any changes to their plans. These regulations are designed to ensure that any modifications to a policy are made with the policyholder’s explicit approval to prevent unauthorized switching.
Technical Safeguards
The Centers for Medicare & Medicaid Services (CMS) is actively considering adding two-factor authentication or other security features to HealthCare.gov to make unauthorized access more difficult.
State-Level Measures
Some states with their own ACA marketplaces have implemented stricter access controls than the federal marketplace. For instance, Colorado and Pennsylvania require consumers to create accounts and select which brokers can access their information. These additional layers of security help prevent unauthorized access and plan switching.
Broker Accountability
When CMS takes action against brokers for unauthorized plan switching, it reports these actions to state insurance departments. These departments have the authority to revoke the licenses of brokers found to be engaging in unethical practices, holding them accountable for their actions and protecting consumers.
At eQuoto, Our Commitment is to Ethical Lead Generation
Unlike fraudulent agents who engage in plan-switching and other unethical practices, eQuoto is dedicated to maintaining the highest standards in compiling and delivering insurance leads. Our commitment to transparency, integrity, and compliance ensures that every lead we provide is genuine and qualified.
We prioritize the needs and trust of our clients and the consumers they serve, fostering relationships built on honesty and respect. At eQuoto, we believe in doing business the right way, providing reliable leads that help insurance providers connect with individuals seeking the coverage they truly need.
Contact the eQuoto team today and experience the difference ethical, high-quality lead generation can make for your insurance business.
