This August, a working group sponsored by the National Association of Insurance Commissioners (the "NAIC") unanimously approved revisions to the NAIC's Unfair Trade Practices Act Model #880 (the "Model Law") to restrain improper marketing of health insurance products. These revisions would provide state healthcare regulators a model for broader authority over health insurance lead generators. With Medicaid disenrollment rates increasing following the reinstitution of recertification processes, the Model Law revisions will provide timely guidance for overseeing healthcare marketers and insurance product sales practices to the disenrolled.^[1]

While the Centers for Medicare and Medicaid Services oversees the marketing of Medicare and Medicare Advantage plans, state regulators are largely responsible for providing guidance on the marketing of private health insurance. The NAIC—a standard-setting and regulatory support organization governed by insurance regulators from the fifty states, the District of Columbia, and five U.S. territories—provides state regulators with model laws, including the regulation of health insurance marketing. In 2021, the NAIC formed the Improper Marketing of Health Insurance Working Group (the "Working Group") to identify deceptive health insurance marketing practices and provide regulators with guidance for combating these tactics.^[2] The Model Law defines what constitutes unfair trade practices in private insurance markets and provides regulators with methods for evaluating and determining whether a practice falls into this category.^[3] In late 2022, the Working Group proposed revising the Model Law to combat fraud and unfair marketing practices.

The Working Group focused its review of the Model Law on health insurance lead generators. Health insurance lead generation involves identifying and qualifying potential customers for health insurance products. Leads can be generated through online marketing, direct mailing, referral systems, among other methods. As with any form of marketing, there are risks that health insurance lead generators may employ misleading tactics to steer customers toward purchasing insurance products that do not fit their coverage needs.^[4]

The proposed Model Law revisions, for the first time, define terms that bring lead generation into regulation. For instance, the revisions define the term "Lead-generating device" to mean "any communication directed to the public that, regardless of form, content, or stated purpose, is intended to result in the compilation or qualification of a list containing names and other personal information to be used to solicit residents of this State for the purchase of [accident and sickness/Medicare supplement] insurance."^[5] The revisions also define "Health Insurance Lead Generator" as an entity that:^[6]

1. Publicizes the availability of what is, or what purports to be, a health insurance product or service that the entity is not licensed to sell directly to consumers;
2. Identifies consumer who may want to learn more about a health insurance product; or
3. Sells or transmits consumer information to insurers or producers for follow-up contact and sales activity.

The revisions note that Health Insurance Lead Generators are subject to unfair practice restrictions to the same extent as insurers under the Model Law.^[7] These restrictions include misrepresenting or falsely advertising an insurance policy; disseminating false information about insurance or an insurer; defaming an insurer by making maliciously critical or derogatory statements about the insurer's financial condition; and failing to maintain complaint handling procedures.^[8] The Model Law revisions would add as an unfair trade practice the failure of a Health Insurance Lead Generator to maintain marketing and performance records for a period of two years.^[9]

The Working Group has voted to fully adopt the suggested revisions, which will now move to the NAIC Executive Committee review.^[10] Once reviewed by this committee, the NAIC will adopt and integrate the revisions into the Model Law. Following the NAIC's adoption of the revisions, state regulators will have the option to adopt the revisions into their own state laws. The NAIC's goal is for as many states as possible to adopt the revisions within three years.^[11]

State regulators may welcome the Model Law revisions to oversee aggressive healthcare marketing practices on the heels of significant Medicaid disenrollment. Currently, millions of people are seeking new healthcare coverage after COVID-19 policies that paused Medicaid redetermination processes ended in May 2023.^[12] A recent secret shopper study suggests that people transitioning from Medicaid are facing aggressive and confusing advertisement tactics. The study found that these practices are frequently leading consumers to pursue limited benefit products (which are plans with lower premiums but with significantly restricted medical benefits) over Affordable Care Act ("ACA") compliant products, while marketers actively conceal and misrepresent costs and the limited coverage associated with such limited benefit products.^[13] Limited benefit plans are not held to the same regulatory standards as ACA-complaint plans and are not intended to be used as a primary form of insurance.^[14] Consumers searching for ACA-compliant products often struggle to distinguish between limited plans due to misleading advertisements and the aggressive sales tactics employed by marketers.^[15] Once the Model Law revisions are formally approved by the NAIC, states that adopt them will be able to pursue entities employing these tactics under state unfair trade practice laws.

[1] Susan Morse, More than 3.6 Million People Disenrolled from Medicaid, Healthcare Finance News (Jul. 25, 2023), www.healthcarefinancenews.com/news/more-36-million-people-disenrolled-medicaid.

[2] NAIC, New Working Group Formed on Improper Marketing of Health Plans, (Aug. 23, 2021), https://content.naic.org/article/naic-forms-working-group-fight-improper-marketing-health-plans.

[3] NAIC Model Law #880, Unfair Trade Practices Act (2021), https://content.naic.org/sites/default/files/model-law-880.pdf.

[4] Bram Sable-Smith, Open Enrollment is Here. Watch Out for Misleading Marketing, Kaiser Health News (Nov. 1, 2022), https://www.nbcnews.com/health/health-care/health-insurance-open-enrollment-spot-misleading-marketing-insurance-rcna54850.

[5] NAIC Model Law #880 Draft #4, Unfair Trade Practices Act (2021), https://content.naic.org/sites/default/files/national_meeting/Model%20880%20Draft%204%20-%207.27.23.pdf.

[6] Id. at 1.

[7] Id. at 2.

[8] Id. at 2-9.

[9] Id. at 3.

[10] Amy Lotven, State Insurance Officials Take Steps to Oversee 'Lead Generators', Inside Health Policy (Aug. 18, 2023), https://insidehealthpolicy.com/daily-news/state-insurance-officials-take-steps-oversee-lead-generators#:~:text=A%20panel%20of%20state%20regulators,among%20others%2C%20believe%20the%20lead.

[11] NAIC, NAIC Model Laws, (Aug. 8, 2023), https://content.naic.org/ciprtopics/naic-model-laws.

[12] Morse, supra note 1.

[13] See John Hilton, Study: Americans Who Lost Medicaid Likely Besieged by False Marketing, Insurance Newsnet (Aug. 21, 2023), https://insurancenewsnet.com/innarticle/study-americans-who-lost-medicaid-likely-besieged-by-false-marketing#:~:text=%22Misleading%20marketing%20of%20limited%20benefit,Center%20on%20Health%20Insurance%20Reforms.

[14] Dania Palanker, Kevin Lucia, Limited Plans with Minimal Coverage are Being Sold as Primary Coverage, Leaving Consumers at Risk, Commonwealth Fund (Sept 10, 2021), https://www.commonwealthfund.org/blog/2021/limited-plans-minimal-coverage-are-being-sold-primary-coverage-leaving-consumers-risk.

[15] Id.