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Donna received the letter canceling her insurance plan on Sept. 16. Her insurance company, LifeWise of Washington, told her that they'd identified a new plan for her. If she did nothing, she'd be covered.

A 56-year-old Seattle resident with a 57-year-old husband and 15-year-old daughter, Donna had been looking forward to the savings that the Affordable Care Act had to offer.

But that's not what she found. Instead, she'd be paying an additional $300 a month for coverage. The letter made no mention of the health insurance marketplace that would soon open in Washington, where she could shop for competitive plans, and only an oblique reference to financial help that she might qualify for, if she made the effort to call and find out.

Otherwise, she'd be automatically rolled over to a new plan -- and, as the letter said, "If you're happy with this plan, do nothing."

If Donna had done nothing, she would have ended up spending about $1,000 more a month for insurance than she will now that she went to the marketplace, picked the best plan for her family and accessed tax credits at the heart of the health care reform law.

"The info that we were sent by LifeWise was totally bogus. Why the heck did they try to screw us?" Donna said. "People who are afraid of the ACA should be much more afraid of the insurance companies who will exploit their fear and end up overcharging them."

Donna is not alone. Across the country, insurance companies have sent misleading letters to consumers, trying to lock them into the companies' own, sometimes more expensive health insurance plans rather than let them shop for insurance and tax credits on the Obamacare marketplaces -- which could lead to people like Donna spending thousands more for insurance than the law intended. In some cases, mentions of the marketplace in those letters are relegated to a mere footnote, which can be easily overlooked.

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As New Exchanges Roll Out, Regulators Accuse Humana, Aetna of Misleading Policyholders

The Kentucky Department of Insurance fined Humana earlier this month for instructing existing individual policyholders to renew their current plans for 2014 within 30 days of receiving the letter in late August or be switched to a pricier policy. Humana's letter to 6,500 policyholders in Kentucky was "misleading," the insurance department said.

Humana disclosed only in a footnote that policyholders have the option to enroll in rival plans on the exchanges, and it didn't mention that some policyholders might be eligible for federal subsidies to purchase coverage on the exchanges, the regulator found.

"This letter was preying on people's lack of knowledge about their consumer protections, their rights," said Sharon P. Clark, Kentucky's insurance department commissioner. The regulator fined Louisville-based Humana $65,000.

Similarly, spokesmen for state insurance regulators in Colorado and Missouri said they are looking into complaints from consumers who received letters from Humana.

Meanwhile, the Arizona Department of Insurance rejected Aetna Inc. AET -0.14%'s request to distribute an advertising brochure in the state touting a "one-time opportunity" for savings. The ad read: "Health Care Reform is here. Higher rates can wait."

In a letter to the carrier, the department said the advertisement contained "several misleading and possibly untruthful statements."

In letters to current policyholders, two insurers based in Washington state neglected to tell members they could switch carriers or shop on the consumer marketplaces, according to the state's insurance commissioner.

Instead, Premera Blue Cross and its affiliate, LifeWise Health Plan of Washington, only suggested their own 2014 coverage as an option. "If you're happy with this plan, do nothing," the letters state. The letters say some people may be eligible for a "health premium tax credit," but don't mention the exchanges at all.

In response, Mike Kreidler, Washington's insurance commissioner, issued a consumer alert last week after dozens of people complained. "Don't just take what your insurance company says—make sure you shop around," Mr. Kreidler said.

CareFirst BlueCross BlueShield, which sells insurance in Maryland, mailed postcards earlier this month that pitched monthly rates as low as $56. Insurance sold on the exchanges could very well be more expensive "than rates available to you today," reads the CareFirst postcard.

Heather Braden, a 30-year-old part-time nurse from Louisville, Ky., said she currently has her family of four on a bare-bones, high-deductible plan with Humana with a monthly premium of $300.

In a letter dated Aug. 21, Ms. Braden said, Humana told her she had 30 days to renew her current plan at the same price, meaning she would have to decide and sign up before she had a chance to see her options when the state insurance exchange opens Oct. 1. If she failed to meet that deadline, she said Humana said in the letter, she would have to pay $719.88 a month for a Humana plan that is compliant with the new health law.

Ms. Braden said her family couldn't afford that premium on its household annual income of around $80,000. The language in the letter suggests "that it's more affordable to opt out of the exchanges," said Ms. Braden, whose current plan doesn't cover maternity care or her husband's sleep-apnea treatments. http://online.wsj.com/news/articles/SB10001424052702303983904579093620
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The insurance companies argue that it's simply capitalism at work. But regulators don't see it that way. By warning customers that their health insurance plans are being canceled as a result of Obamacare and urging them to secure new insurance plans before the Obamacare launched on Oct. 1, these insurers put their customers at risk of enrolling in plans that were not as good or as affordable as what they could buy on the marketplaces.

Before Obamacare, Donna paid a $724 monthly premium for $10,000 deductible, catastrophic health coverage from LifeWise, a subsidiary of the state's Blue Cross/Blue Shield affiliate. She asked that her last name be withheld because she was disclosing personal financial information.

The Sept. 16 letter from LifeWise told her that her existing plan was being canceled to comply with the new requirements of Obamacare and that she would automatically be rolled over into a new plan that was the "closest match" to her old plan. "If we don't hear from you, we'll automatically move you to this plan and you'll be covered starting January 1, 2014," the notice read.

Under the new LifeWise plan, Donna would have to pay more than $1,000 a month, a nearly $300 per month increase and a huge hit for a family with an income around $40,000. It was bare-bones coverage by ACA standards, with a $6,350 deductible.

The letter ( http://www.scribd.com/doc/180817793/lifewise-renewal-letter-pdf) made no mention of the insurance marketplace that was about to open, where she could shop around for other options. It did mention that she might qualify for financial help in the form of a tax credit but the onus was on Donna to call the insurer for more information.

Fast forward a month, and Donna was able to log onto Washington's marketplace and shop for insurance. And what did she find? Options. A LifeWise plan with the same deductible they offered her outside the exchange was a little cheaper. Plans with a lower deductible had the same or lower premiums as the LifeWise plan. What she ended up buying was a plan through Community Health Plan of Washington with a $250 deductible.

And crucially, she also discovered she would qualify for a federal tax subsidy that would knock her monthly premium to $80. Her daughter could enroll in Medicaid, at no cost to the family.

So here's the bottom line: If Donna had taken the default option that LifeWise offered outside of the marketplace, she would have paid nearly $1,000 per month for a worse plan than she was able to obtain on the marketplace.

As a result of the letter LifeWise sent to Donna and other customers, state regulators in Washington issued a consumer alert ( http://www.scribd.com/doc/180817948/Washington-Consumer-Alert-pdf) on Sept. 19, warning residents about the misleading information. "Don't just take what your insurance company says, make sure you shop around. You have the right to buy any plan inside the new exchange or in the outside market," Insurance Commissioner Mike Kreidler said in the alert.

But the agency doesn't have the statutory authority to stop LifeWise from sending the misleading letters, a spokeswoman said. The company controls one-third of the state's 300,000-person individual health insurance market -- leaving a lot of people at risk of being duped.

"Yes, that's possible," Stephanie Marquis, the spokeswoman, said when asked if some Washingtonians could be paying much more for insurance than they could if they went on the exchange because of LifeWise's actions.

"One of our concerns has been that people don't know they have these new rights," Marquis said. "The insurance companies can manipulate or withhold that information to increase their market share. It's just really disingenuous."

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Humana fined $65,430 in connection with 'misleading' insurance letter

The Kentucky Department of Insurance has fined Humana $65,430 because it offered policyholders an unapproved opportunity to amend their insurance as part of a letter that regulators have called “misleading.”

The department investigated letters sent in August to 6,543 individual plan policyholders in Kentucky. The letters said they needed to renew their plans for 2014 within 30 days or choose a more expensive option that complies with the Affordable Care Act.

But regulators last month called the letters misleading, arguing they did not make sufficiently clear that policyholders could compare and choose competing plans on the state’s health insurance exchanges, which open on Oct. 1, and for which they could be eligible for federal subsidies.

Humana's letter mentioned the exchange enrollment period, but only in a footnote. It also said a customer can get the cheaper premium option by agreeing to changes that hadn’t been approved by the state insurance department.

While the investigation continues into whether the letter was intentionally misleading, state officials said, the department fined Humana on Sept 10 for the unapproved amendment that “caused confusion” among policyholders. An estimated 2,200 returned signed amendments, it said.

“The Department of Insurance fined Humana for providing members with a policy amendment form that was not approved. This was a clear-cut violation of Kentucky’s insurance code,” said Sharon Clark, Insurance Department commissioner.

“The Department has other concerns with the letter and with Humana’s actions. We have met with Humana and continue our investigation. We will take additional administrative action, if appropriate,” she said.

Clark has previously said she considered the letter “misleading intentionally.” http://www.courier-journal.com/apps/pbcs.dll/article?AID=2013309240089
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But like LifeWise, Humana downplayed the fact that people could search the marketplace for other insurance options or that they might qualify for Obamacare's financial assistance, state insurance commissioner Sharon Clark, said in an interview. A footnote referenced the "open enrollment period" that started Oct. 1, but didn't name the state's marketplace or the ACA's financial assistance directly.

After receiving the letter, which you can read here, some customers were badgered through phone calls to make a decision, Clark said. Of the 6,500 people who received a letter, 2,200 actually responded and gave the company their answer before they had a chance to look at what the Kentucky marketplace had to offer.

But Clark's office soon stepped in. They fined Humana $65,000 for the "misleading" information, and the 2,200 respondents were released from their obligation to Humana and freed to shop for insurance through the Obamacare marketplace starting Oct. 1.

The most troubling part of the Humana case is that the company was pushing customers into a Humana insurance plan that was more expensive than the plan Humana was selling on the Obamacare marketplace, without the financial help available under Obamcare.

Clark gave the example of a single mother with children who was urged to sign up for a Humana plan with a monthly premium of $719.86. That price is higher than any comparable plan for sale on the state's insurance marketplace, Clark said -- not to mention that the mother might have qualified for tax subsidies to help pay for it if she went through the marketplace, as Donna did.

"People don't think about insurance every day," Clark said, "and in an environment with so many changes, this has been a period of confusion and uncertainty for people."

Colorado regulators also received complaints about a similar Humana letter, dated Aug. 28 on a copy ( http://www.scribd.com/doc/180818879/Colorado-Humana-Letter-pdf) that went out to 3,400 customers in their state.

It only mentioned the Obamacare marketplace and financial help in, again, a footnote. The company wasn't fined as it was in Kentucky, but state officials forced Humana to send out an apology and a corrected letter that met the state's standards.

"The letter appeared threatening," Vincent Plymell, a spokesman for the state insurance department, said. "You've got to let people know their options. You can't make it seem like they have to stick with your company."

State officials in Missouri also said that they have received complaints about misleading letters from Humana and were in the process of investigating them.

Asked about the Kentucky letter that resulted in a fine, Humana senior vice president for corporate communications Tom Noland offered the following statement via email, but declined to comment further.

"In retrospect, the letter could have been more consumer-friendly and we've rewritten it with that in mind. We are continuing to work closely with the Department of Insurance to ensure our messaging is clear and not adding confusion to consumers during this period of adjustment and transition."

Clark, the Kentucky insurance commissioner, said that Humana executives had told state officials that there had been "a major disconnect" between the marketing and government compliance arms of the company.

"That was the excuse they gave us," she said. "That was the rationale."

"This is a great example of the kind of consumer abuses that are typical of the insurance industry, and they're supposed to stop under the ACA," Ethan Rome, executive director of Health Care For America Now, a pro-Obamacare advocacy group, said. "In this case, they're trying to get in just one more abuse." http://talkingpointsmemo.com/dc/insurance-companies-misleading-letters
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