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Outrageous Insurance Company Tactic Penalizes Family Members

Today’s video definitely belongs in our Wall of Shame category. The video features what we feel is an unsupportable position taken by some insurers when an insured member on a family plan transitions off the plan. The tactic involves the insurer requiring members of the family who are not transitioning to start an entirely new deductible even if they have already met their individual deductible. To be clear, we are referring to policies in the individual market.

We encountered this with a couple when the older spouse, who was the listed subscriber of the plan, was transitioning to Medicare. The insurer insisted the younger spouse, who was remaining with the carrier, enroll in a new plan and start a new deductible even though she had already met her deductible. They were not willing to let the younger spouse become the subscriber on the plan once the older spouse transitioned to Medicare. My staff filed an appeal with the state insurance department and, fortunately, the appeal was successful.

We also encountered this situation in another state with a young adult son who was covered with his mother who was planning a transition to Medicare. Again, the insurer maintained that the son would have to meet his deductible anew even though he had already met the annual deductible. The simplest solution in this instance was to defer the mother’s transition to Medicare until later in her Initial Enrollment Period but this shouldn’t have been necessary.

These situations seem to be shameless money grabs. But if regulators charged with the responsibility to oversee these problems do nothing, then one possible approach is to have the younger spouse be the subscriber in an individual insurance application with two or more people. This way when the older, “family member” spouse transitions off the plan, there is no issue of the younger spouse needing to re-enroll in a plan and possibly face the deductible issue. We’d go so far as to say that in a year that a transition is anticipated by a family member, let the family member facing a transition apply for coverage as an individual so that other family members are not affected.

Let’s remember that deductibles do not reset with COBRA, the temporary extension of group coverage. Group coverage is the dominant form of coverage in the United States so if insurers can manage this issue in the group market, they can manage it in the individual market.

In sum, we don’t see any justification for not giving an individual credit for any portion of an individual deductible met in a year where some other family member transitioned to other coverage. The original coverage is affected when such a situation occurs, of course, because the number of covered lives, premiums due and the subscriber change. These are administrative details. Again, we see no possible justification for making anyone repeat a deductible or not even be given credit toward the deductible when their status has not changed.

Regulators, where are you on this issue?

As always, thanks for reading and watching.

Beginning next week and through the Labor Day weekend, we will be replaying some of our most important videos. Please forward your thoughts and ideas so that when we pick up with new material in September, we are responding to your concerns.

Enjoy the summer!