Just outside the gate of Charlotte鈥檚 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鈥檚 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.
Today Huggins is among dozens in Charlotte who are learning that their 鈥渇ree鈥 coverage requires them to cover a $5,000 deductible and costs them eligibility for some of the free medical services they鈥檝e relied on.
鈥淲e have people who really need their medicine, and we can鈥檛 give it to them,鈥 said Susan Royster of Charlotte-based , which provides free prescription drugs for the uninsured.
Normally, the Carolinas鈥 most impoverished residents don鈥檛 qualify for help under the Affordable Care Act. In states that didn鈥檛 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 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 鈥渟treet hustling鈥 at $11,700 a year, which, he says, can get the federal government to foot the entire bill for high-deductible insurance. It鈥檚 not ideal, he says, but it鈥檚 better than having no insurance.
鈥淲hat 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,鈥 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鈥檚 age and smoking status. Those payments go directly to , 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鈥檚 commissions say it鈥檚 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 鈥渟uspected fraud鈥 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鈥檚 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鈥檚 sales to the homeless. 鈥淎etna takes the allegations against this broker very seriously,鈥 said spokesman Walt Cherniak.
National experts on the ACA say they鈥檝e never heard of anything like this mass enrollment, though they鈥檙e well aware of the coverage gap in North Carolina and 20 other states that have refused federal money to expand Medicaid.
鈥淲ow. Unbelievable,鈥 said Sabrina Corlette, a senior research fellow with Georgetown University鈥檚 . She said plans that require the homeless to make big out-of-pocket payments aren鈥檛 real coverage: 鈥淵ou might as well ask them to fly to the moon.鈥
Kim Huggins’ ‘free’ coverage required her to cover a $5,000 deductible. (Photo by Todd Sumin/Charlotte Observer)
Dozens of homeless people who get their mail at Charlotte鈥檚 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.
聽鈥淚 really don鈥檛 know what鈥檚 going on with this,鈥 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鈥檛 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鈥檚 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鈥檚 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 , the ACA specifies that people who fall below that mark won鈥檛 be asked to repay subsidies if they made a good-faith estimate.
What is income?
Kennedy found a 2013 about the strategy of estimating income high enough to get a subsidy, even if there鈥檚 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鈥檛 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.
鈥淚t was all under my direction. I believe in what I鈥檓 doing,鈥 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鈥 report about her dealings with Jeff, but Coventry confirmed to Huggins that the sale went through Kennedy.
Kennedy says he filed 鈥渁 large number鈥 of applications from homeless people projecting they would earn $11,700 in 2015. They used the subsidy to buy a Coventry 鈥渂ronze plan,鈥 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鈥檚 $621 a month, or $7,452.
Kennedy acknowledges there鈥檚 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鈥檚 not realistic for people who don鈥檛 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鈥檚 name through the computer every time a prescription is filled to verify that he or she doesn鈥檛 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鈥檚 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.
鈥淚 said, 鈥榃hat?鈥 I didn鈥檛 sign up. I hadn鈥檛 gotten a card or bill,鈥 says Harper, 61. He and Cherry both say they don鈥檛 have income, didn鈥檛 tell anyone they make $11,700 a year and don鈥檛 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 鈥渘eighbors,鈥 to open the letters and let them see what was going on. That鈥檚 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 . 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鈥檛 be provided to the uninsured.
Hoard agrees that can be a problem but said the trade-offs of losing regular care and medication aren鈥檛 worth it.
鈥淗e certainly has interfered substantially with the ability of our neighbors, of the chronic homeless, to obtain medical care,鈥 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鈥檛 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 , 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鈥檚 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鈥檚 concerns to a 鈥渢urf war鈥 and said staff members are telling his customers they could get in trouble and coaching them to say they weren鈥檛 fully informed about the purchase. He said he had checked with MedAssist and hadn鈥檛 been informed that the prescription drugs were only available to the uninsured. However, MedAssist鈥檚 Web page is topped with the slogan 鈥淒ispensing hope for the uninsured鈥 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.
鈥淚 really did my due diligence,鈥 he said. 鈥淚 wish they would expand Medicaid. That would solve the problem.鈥
