Regulators Examine 'Frankenstein' Insurance Products as Consumer Harm Mounts
State regulators are warning of increasingly sophisticated insurance schemes that collectively cost consumers more than $308 billion annually, according to the Coalition Against Insurance Fraud. Recent enforcement actions in New Hampshire have spotlighted how bundled products masquerading as comprehensive health plans leave policyholders with inadequate coverage while generating substantial commissions for sellers.
Background and Context
The New Hampshire Insurance Department's Fraud Unit recently conducted a comprehensive webinar addressing financial abuse patterns across insurance markets. The presentation revealed how regulatory gaps have allowed problematic products to proliferate, particularly those targeting vulnerable populations including seniors and low-income consumers seeking affordable healthcare options.
Key Figures and Entities
Joshua Hilliard, Compliance & Enforcement counsel for the New Hampshire Insurance Department, detailed several concerning practices during the webinar. According to Hilliard's presentation, one insurance agency faced $250,000 in penalties after their bundled products were found to provide insufficient coverage, with consumers receiving $82,000 in restitution. The department's Enforcement division, despite operating with limited staffing, recovered $6.5 million for affected consumers in the past year alone.
Legal and Financial Mechanisms
The investigation uncovered how "Frankenstein" plans—composite products stitched together from multiple insurance offerings—are being marketed as comprehensive healthcare solutions despite significant coverage gaps. Hilliard explained that health care sharing ministries, while operating in a legal gray area, frequently leave members exposed to substantial medical costs. Meanwhile, commission-driven annuity sales continue targeting financially unsophisticated consumers despite ethical concerns about their suitability for most buyers.
International Implications and Policy Response
The New Hampshire experience reflects broader national challenges in regulating insurance products that increasingly blur traditional lines between coverage types. Mystery service contracts, which deliberately conceal key terms and conditions, have prompted new transparency regulations specifically designed to protect older adults. Hilliard noted that his department directs consumers toward the ACA marketplace when encountering problematic health sharing arrangements, highlighting how inadequate existing products push consumers toward government-regulated alternatives.
Sources
This report draws on information presented by the New Hampshire Insurance Department's Compliance & Enforcement division, data from the Coalition Against Insurance Fraud, and regulatory enforcement actions documented between 2023 and 2024. Specific case details were provided during the NHID's educational webinar for insurance professionals and consumers.
