The Skimpy Health Plan Trojan Horse

In recent years, some companies have begun offering “limited-partnership” coverage that skirts state regulations and avoids key consumer protections under the Affordable Care Act (ACA). These plans promise lower premiums but deliver inadequate coverage. A long-running lawsuit challenging what constitutes an employee-based health plan could soon give these skimpy policies a significant boost.

The case revolves around Data Marketing Partnership’s claim that its limited partners should be considered employees entitled to buy into the company’s job-based health insurance plans. The plaintiff wants official recognition as an employer so it can continue to offer this type of coverage without complying with state insurance rules or ACA requirements. This could have far-reaching implications for consumers and regulators.

The stakes are high, particularly in light of recent premium surges on ACA marketplaces that have led millions to drop coverage this year. The Trump administration’s push to expand access to alternative coverage has added to the uncertainty. “Depending on what happens with the settlement, this could be an even bigger expansion,” said Katie Keith, director of the Center for Health Policy and the Law at the Georgetown University Law Center.

A green light for these limited-partnership plans could lead to a proliferation of unregulated insurance companies. Ali Khawar, principal deputy assistant secretary of the Department of Labor’s Employee Benefits Security Administration during Joe Biden’s presidency, notes that “functionally, would be unregulated insurance companies” could arise if this type of coverage takes off.

Insurers are already requesting double-digit increases in ACA premiums next year, partly due to declining enrollment and the loss of healthier policyholders. This trend could accelerate as more people opt for alternatives like limited-partnership policies, which may seem appealing but leave consumers with large, unpaid medical bills.

The Department of Labor has defended its stance that individuals who download software are not employees or bona fide partners. However, a district court judge in Texas ruled against the department, calling its advisory opinion “arbitrary and capricious.” The 5th Circuit Court of Appeals later upheld the lower court’s decision but ordered it to reconsider whether someone who downloads software is an employee.

Maryland’s insurance commissioner, Marie Grant, warns that if the case goes the wrong way, it could impact consumers or hamstring the states. Other organizations have tried offering similar coverage, with some states taking action against purveyors of limited-partner policies. In 2024, Maryland fined a company for offering unlicensed health insurance in the state. Washington ordered another company to stop offering its plans and imposed a $25,000 fine.

As this case plays out, regulators and consumers must remain vigilant. A settlement could add more uncertainty to insurance markets, potentially paving the way for a proliferation of unregulated insurance companies. It’s essential to scrutinize these limited-partnership plans and their marketing tactics, which often target unsuspecting consumers.

The implications are far-reaching, particularly in light of recent premium increases on ACA marketplaces. A green light for skimpy health plans could have far-reaching consequences, impacting not only consumers but also the states’ ability to regulate insurance markets. As this case comes to a head, it’s crucial to consider what’s at stake: the very fabric of our health insurance system and the well-being of millions who rely on it.