From ‘Frankenstein’ plans to annuities: Regulators warn of rising insurance abuse

Illustration showing two hands casting a web of abuse on a person.

By Anna Baluch

Insurance fraud remains a significant issue, stealing over $308 billion annually from consumers, according to the Coalition Against Insurance Fraud. The New Hampshire Insurance Department (NHID) Fraud Unit recently held a webinar to help insurance professionals and consumers identify financial abuse in insurance markets.

The session dove deep into financial abuse, enforcement procedures, problematic insurance products and sales practices, and recent enforcement actions.

'Frankenstein' bundled products

Joshua Hilliard, Esq., NHID Compliance & Enforcement counsel, began by highlighting “Frankenstein” plans, which bundle several insurance products in an attempt to mimic major health care plans.

In many cases, these plans are misrepresented and provide inadequate coverage, leading to significant consumer harm. Hilliard offers an example where an agency was fined $250,000 and consumers received $82,000 in restitution.

Health care sharing ministries, annuity sales

Hilliard explained that health care sharing ministries, which have traditionally been a safe harbor under New Hampshire law, often provide substantial gaps in coverage. As a result, NHID has taken administrative action against the unlawful entities that offer them and directs consumers to the ACA marketplace.

Additionally, Hilliard uncovers issues with annuity sales, explaining that some annuities are simply unsuitable for most consumers and that commission-driven sales practices remain prevalent despite ethical issues. When considering an annuity, he urged consumers to seek financial and/or legal advice from a professional who is not involved in the sale.

Transparency for Medicare Advantage plans

Next, Hilliard addressed mystery service contracts, which usually conceal important information and purposely target vulnerable consumers, such as seniors. The NHID has implemented new regulations to improve transparency and keep older adults safe. Hilliard also explored concerns with Medicare Supplement and Advantage plans, including their poor affordability and limited availability.

According to Hilliard, NHID’s Enforcement division is working to support both consumers and providers. At the end of the day, their goal is to protect everyone involved with these types of products and ensure market fairness.

In just the last year alone, the division recovered $6.5 million for consumers, despite being understaffed. Hilliard ended the webinar by reinforcing the importance for insurance buyers and sellers to be transparent, report unfair practices, and cooperate with investigations when necessary.

If buyers are cautious and take the time to fully understand their coverage and cost before signing on the dotted line and sellers are upfront and informative about their offerings, we all win.