Just outside the gate of Charlotte’s Urban Ministry Center, where the homeless often gather with people selling them something, Kim Huggins got a pitch from an acquaintance she knows only as Jeff.
If she would give him her name and Social Security number, she would get free health insurance and he would earn $5.
Huggins, who was sleeping on a friend’s floor, says she handed the man her Social Security and ID cards and he filled out a form.
Her form, along with 600 others from across the Carolinas, went to Charlotte insurance agent Will Kennedy. Almost all the applications he submitted had an estimated annual income of $11,700, and many of the addresses were the Urban Ministry Center and other homeless help centers, according to a complaint filed with the N.C. Department of Insurance.
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Today Huggins is among dozens in Charlotte who are learning that their “free” coverage requires them to cover a $5,000 deductible and costs them eligibility for some of the free medical services they’ve relied on.
“We have people who really need their medicine, and we can’t give it to them,” said Susan Royster of Charlotte-based NC MedAssist, which provides free prescription drugs for the uninsured.
Normally, the Carolinas’ most impoverished residents don’t qualify for help under the Affordable Care Act. In states that didn’t expand Medicaid, as the act intended, people who fall below the federal poverty line get nothing while those who earn just above $11,700 can get hundreds of dollars a month in federal aid.
Kennedy, 43, a tax accountant turned insurance agent, says he found a legal, risk-free way to work around that. He encourages the homeless to estimate income from barter, panhandling and “street hustling” at $11,700 a year, which, he says, can get the federal government to foot the entire bill for high-deductible insurance. It’s not ideal, he says, but it’s better than having no insurance.
“What I have done, and what I make no apology for, is to work diligently to inform low-income individuals about their rights under the ACA and to help those who qualify obtain the health insurance for which they are eligible,” Kennedy said.
The CoventryOne plans Kennedy sold cost the federal government between about $2,500 and more than $7,000 a year, depending on the customer’s age and smoking status. Those payments go directly to the insurance company, which is owned by Aetna, and Kennedy gets a monthly commission on each policy. Kennedy and Aetna declined to say how much that commission is, but two agents familiar with Aetna’s commissions say it’s about $15 a month. For 600 policies, that would come to $9,000 a month.
The N.C. Department of Insurance has been trying to sort out the arrangement since April 20, when a San Francisco-based software executive reported “suspected fraud” based on the large volume from one agent in two days, with identical incomes and many repeated addresses. George Kalogeropoulos, president of HealthSherpa Insurance Agency, told the state his company immediately disabled Kennedy’s access to the ACA enrollment software.
Because questions about subsidies involve the ACA marketplace and IRS rules, the state sought federal guidance, says N.C. Department of Insurance spokeswoman Kerry Hall. The investigation is ongoing, said Hall and Aaron Albright, spokesman for the federal marketplace.
Aetna also launched an inquiry after the Observer asked about Kennedy’s sales to the homeless. “Aetna takes the allegations against this broker very seriously,” said spokesman Walt Cherniak.
National experts on the ACA say they’ve never heard of anything like this mass enrollment, though they’re well aware of the coverage gap in North Carolina and 20 other states that have refused federal money to expand Medicaid.
“Wow. Unbelievable,” said Sabrina Corlette, a senior research fellow with Georgetown University’s Center on Health Insurance Reforms. She said plans that require the homeless to make big out-of-pocket payments aren’t real coverage: “You might as well ask them to fly to the moon.”
Dozens of homeless people who get their mail at Charlotte’s Urban Ministry Center are now getting letters from the marketplace demanding documentation of their income. Three of them, including Huggins, told the Observer they did not provide anyone an income estimate.
“I really don’t know what’s going on with this,” said Steven Cherry, 49, a recovering substance abuser who said he learned he had insurance when he was denied medication at MedAssist.
A patchwork system
When congressional Democrats approved the ACA in 2010, the plan was for Medicaid to cover the most impoverished people. The federal government designated billions to pay for expanding Medicaid.
But when the Supreme Court ruled that Congress couldn’t force states to participate, the Carolinas and about two dozen other Republican-led states refused the money (a handful have since approved their own plans), leaving most people below the poverty line with nothing.
That’s the gap that Kennedy stepped into.
Kennedy got a North Carolina license to sell health insurance on Sept. 27, 2013, just days before the marketplace began taking applications for 2014 subsidized insurance. He used to have an office on North Tryon Street, in the area just north of uptown Charlotte where many services for the homeless are provided. Kennedy said that when a homeless person approached him in 2014, he assumed that people with little or no income were out of luck. He says he researched the health care law and discovered that he could get them covered.
The ACA subsidies are actually advance tax credits based on a person’s projected income. For workers who rely on hourly wages, temp work, tips, commissions and other variable pay, that projection can be a guess.
If that estimate proves wrong, the person getting the subsidy settles up with the IRS at tax time. Generally, lower-than-expected income brings a refund, while higher pay means the taxpayer owes the government. If income falls below the poverty line, the person loses eligibility for any subsidy.
Rather than impose a tax penalty on the poor, the ACA specifies that people who fall below that mark won’t be asked to repay subsidies if they made a good-faith estimate.
What is income?
Kennedy found a 2013 Kaiser Health News article about the strategy of estimating income high enough to get a subsidy, even if there’s a good chance the person will actually fall below the cutoff.
The article focused on the working poor, but Kennedy says he concluded he could help the unemployed and homeless by offering them a different way to think about income. He says the IRS considers all kinds of income taxable that aren’t traditionally reported, from handouts, barter and under-the-table cash payments to money earned from prostitution and drug sales.
When the 2015 ACA enrollment season opened, Kennedy says he had developed a message and recruited a team to take it to homeless people: If you think you bring in $33 a day from any such sources, you can get free Obamacare at no risk.
“It was all under my direction. I believe in what I’m doing,” Kennedy said. He would not, however, provide any details about who worked for him, how they were compensated and how many policies he sold. He would not comment on Huggins’ report about her dealings with Jeff, but Coventry confirmed to Huggins that the sale went through Kennedy.
Kennedy says he filed “a large number” of applications from homeless people projecting they would earn $11,700 in 2015. They used the subsidy to buy a Coventry “bronze plan,” with the federal government paying the full monthly premium. For a 27-year-old nonsmoker, the government pays Coventry $213 a month, or $2,556 a year. For a 60-year-old smoker it’s $621 a month, or $7,452.
Kennedy acknowledges there’s a tradeoff to the low-premium plan: People must pay $15 for primary care visits, $75 for specialists and $250 for emergency room visits. Checkups, health screenings and other preventive services are fully covered. But for other care, the plan has a $5,000 deductible, the amount that must be paid before insurance kicks in, and a $6,600 out-of-pocket cap, the maximum allowed under the ACA.
Other plans are available with little or no out-of-pocket spending, but they require a small monthly payment, Kennedy says. He said that’s not realistic for people who don’t have bank accounts or debit cards.
Helping or hurting?
In Charlotte, an array of free and low-cost clinics and medical programs serve the uninsured.
NC MedAssist, for instance, is a nonprofit pharmacy that relies on pharmaceutical company donations. The staff runs each patient’s name through the computer every time a prescription is filled to verify that he or she doesn’t have insurance.
In May, staff members started noticing that people they considered destitute suddenly had insurance. One of them was Rick Harper, who says he lived at the Men’s Shelter and panhandled before getting into a residential treatment program and sobering up about six months ago. He says he went to get prescription eye drops and was told he was no longer eligible because he had CoventryOne insurance.
“I said, ‘What?’ I didn’t sign up. I hadn’t gotten a card or bill,” says Harper, 61. He and Cherry both say they don’t have income, didn’t tell anyone they make $11,700 a year and don’t file taxes.
In June, letters from Coventry and the federal marketplace started pouring in at Urban Ministry Center. More than 800 people use it as their mailing address, ranging from those who live on the street to those staying in temporary quarters.
Urban Ministry staff said they asked a couple of people picking up mail, known as “neighbors,” to open the letters and let them see what was going on. That’s when they learned about people being signed up for ACA coverage, said Budget Director Rich Hoard.
Hoard said he and other staffers were concerned because the insurance meant neighbors lost access to services such as MedAssist and the free Charlotte Community Health Clinic. When Urban Ministry staff members helped neighbors cancel their insurance, Kennedy showed up twice urging them to stop.
Kennedy said that even with the out-of-pocket costs, the homeless are better off with insurance because they can get expensive hospital procedures such as artery-opening stents, which are not considered emergency care and wouldn’t be provided to the uninsured.
Hoard agrees that can be a problem but said the trade-offs of losing regular care and medication aren’t worth it.
“He certainly has interfered substantially with the ability of our neighbors, of the chronic homeless, to obtain medical care,” Hoard said.
Sorting it out
The Urban Ministry Center and MedAssist have been helping people cancel policies that keep them from getting care. Those who don’t take any action will lose their insurance if they fail to provide documentation of income to the marketplace.
Even if the policies are canceled, those who bought them could still face problems, said Madison Hardee, a health care navigator and lawyer with Legal Services of Southern Piedmont, and Jen Tolbert, an ACA expert with the Kaiser Family Foundation, which analyzes health care policy.
The applications require buyers to vouch that the information provided is correct under penalty of perjury. While it might be difficult to prove, applicants who provide false income estimates could face a penalty up to $25,000, Tolbert said. And those who fail to file tax returns for 2015 could be banned from receiving ACA subsidies in the future, even if they start earning legitimate income, Tolbert and Hardee said.
Kennedy said he’s working with everyone who bought policies to help them provide documentation, which can include a self-reported statement of income.
He attributed the Urban Ministry Center’s concerns to a “turf war” and said staff members are telling his customers they could get in trouble and coaching them to say they weren’t fully informed about the purchase. He said he had checked with MedAssist and hadn’t been informed that the prescription drugs were only available to the uninsured. However, MedAssist’s Web page is topped with the slogan “Dispensing hope for the uninsured” and lists eligibility requirements that exclude people who qualify for insurance.
Kennedy said charities that help the homeless would serve them better by helping him provide better coverage. For instance, he said, a nonprofit could create a fund to pay monthly premiums that would let homeless people get policies with lower out-of-pocket costs.
He said people concerned about the poor should focus on Medicaid expansion rather than his sales.
“I really did my due diligence,” he said. “I wish they would expand Medicaid. That would solve the problem.”
Researcher Maria David contributed.
Will Kennedy on ACA
Excerpts from Kennedy’s statement on selling subsidized Affordable Care Act insurance to homeless people.
Many low-income individuals can become eligible for an ACA subsidy simply by accurately reporting all of their income to the Marketplace. Examples include cash income, barter income, even panhandling or street hustling, all of which count as income for both the IRS and the ACA. If someone cleans house, does dishes, and watches the kids in exchange for a place to stay, that is income. When all income is properly accounted for, many more people are able to project an income greater than the federal poverty level (approximately $33 per day), allowing them to qualify for an ACA subsidy.
Every client who signs up wants the insurance. Some clients may subsequently be asked to provide an updated income estimate (which can be by means of a self-attestation) or risk cancellation of their tax credit. If the client is unwilling or unable to provide this information, then the policy may be canceled. If the policy is canceled, the tax credit is returned to the federal government. In such a situation, the client does not owe any money, and the agent does not receive any commission.
What I have done, and what I make no apology for, is to work diligently to inform low-income individuals about their rights under the ACA, and to help those who qualify obtain the health insurance for which they are eligible.
Like many federal laws, the ACA is a complex piece of legislation and is not understood by many, especially those who need it the most. ... I encourage nonprofit organizations, like the Urban Ministry, to encourage their clients who are eligible for free private insurance under the ACA to obtain that insurance. With free or sliding scale services, clients face long wait lists and limited services. There is no guarantee of services, and even when services are provided, the clients receive only basic services.
By contrast, clients with high deductible ACA insurance plans can also take advantage of free or sliding scale services for items subject to deductible. In addition, however, the ACA insurance plan means that if the patient is hospitalized they will receive the same care as any insured patient, as opposed to the minimum level of care they receive when they are uninsured and without Medicaid. ACA clients can also see the primary care doctor of their choice, and all are entitled to a free annual physical.
▪ People who have been signed up for insurance and have concerns about the policies they bought can call the N.C. Department of Insurance, 855-408-1212, menu option 2. In South Carolina, call 800-768-3467 or email firstname.lastname@example.org.
▪ Free advice on the federal marketplace and other options for low-income people is available from people who are not paid to sell insurance. Call 855-733-3711 or visit connector.getcoveredamerica.org to schedule an appointment in North Carolina; call 888-998-4646 in South Carolina.