One Ohio resident paid $240 a month for health insurance that she later learned didn’t cover her knee replacement. Saddled with $48,000 in medical bills, she decided not to get the other knee replaced.
“It’s been devastating to me,” said Elizabeth Belin, who lives in Columbus. The bills totaled more than her annual salary.
A Kansas resident paid premiums on a policy for two years, then found out his insurance would not cover surgery for a newly diagnosed cancer.
The two policyholders have filed a lawsuit in federal court against Health Insurance Innovations, based in Tampa, Fla., accusing the company of misleading them about the kind of policy they were buying.
They say they believed they were purchasing Affordable Care Act plans that include coverage guarantees. But they were sold much less comprehensive coverage that left them vulnerable to tens of thousands of dollars in unpaid medical bills, according to the lawsuit.
Their complaints underscore problems with some types of cheaper health insurance alternatives that the Trump administration has expanded. Critics of the government’s decision, including the Association for Community Affiliated Plans and the National Alliance on Mental Illness, are also suing the Trump administration over relaxation of rules for these plans.
“This isn’t real insurance,” said Jason Kellogg, one of the lawyers representing the individuals in the Florida case. They are seeking class-action status, estimating that as many as 500,000 people may have bought these policies.
In an emailed statement, Health Insurance Innovations said the lawsuit was without merit. “We will vigorously defend ourselves against all such allegations,” the company said.
Proponents of short-term plans say they represent an affordable option for those who can’t pay for the robust coverage mandated by the federal law.
But a recent report by researchers from the Georgetown University Center on Health Insurance Reforms concluded that the lack of oversight meant that “consumers are at risk of being underinsured, with significant financial liability if a high-cost medical event occurs.”
Four states — California, Massachusetts, New Jersey and New York — have largely banned the sale of these products, and others have restricted sales of such plans, according to another analysis.
Jessica Altman, the insurance commissioner for Pennsylvania, told lawmakers at a congressional hearing this year that the state had taken action against eight companies in the last two years for misrepresenting the kind of coverage being sold.
In recent months, Congress has become increasingly concerned about consumers burdened by medical debt, putting a spotlight on surprise medical bills.
At the news conference on Wednesday, Ms. Belin and Christopher Mitchell, the plaintiffs in the lawsuit, said they had no idea they were buying junk insurance.
Ms. Belin, who was recently divorced, had been looking for an Obamacare policy in 2016. She spoke to a sales agent who offered her what she thought was an array of traditional health plans.
“He would find me a plan that would fit my budget,” she recalled being told. Instead, she was sold a limited benefit plan, which sharply capped what it paid for medical care.
Mr. Mitchell bought a similar policy the same year from a broker who promised to find the best plan in Kansas at the best price. He was found to have invasive ductal carcinoma, a type of breast cancer, in early 2018. His doctor told him that he needed surgery, but the hospital where it was scheduled told him that he did not have insurance coverage.
According to the complaint, Health Insurance Innovations participated in a scheme involving Simple Health, another Florida company, whose agents sold them the flimsy coverage. Simple Health was recently shut down by the Federal Trade Commission after regulators accused it of being “a classic bait and switch scheme,” according to court filings.
The lawsuit claims Health Insurance Innovations spent millions of dollars funding Simple Health and was intimately involved in the scripts its brokers used to sell these policies. Customers were told that they were getting a P.P.O. plan, a traditional policy that allows individuals to go to the doctor or hospital of their choice. Many of the websites that consumers visited implied the policies being offered were from brand-name insurers.
The lawsuit quotes from the scripts being used by the brokers. “What’s the point of paying all that money every month if it’s not going to cover the most important things, right???” the broker asks. “This plan covers you from Day 1 …’”
Health Insurance Innovations says it was never involved in Simple Health’s activities. While the company said it had relied on Simple Health brokers to sell policies and collected the premium payments, it required all brokers “to provide clear disclosure of the information necessary for consumers to understand the policies they purchase,” according to its statement.
“Simple Health violated the trust of its consumers, its regulators and us,” the company said, emphasizing that it was not named as a defendant in the F.T.C. case and was cooperating with federal regulators.
The company said it cut its ties to Simple Health last year after the F.T.C. took action against the company.
Health Insurance Innovations, which is publicly held, has also been embroiled in controversy with state regulators over the sale of short-term plans. Last December, it reached a settlement with state regulators over its marketing practices. The company denied any wrongdoing.
With a reported $352 million in sales last year, Health Insurance Innovations specializes in online sales of policies and has benefited from moves by the Trump administration to allow people greater access to plans that do not meet the Obamacare requirements.
But Mr. Mitchell says his experience should serve as a cautionary tale to those shopping for their own policies. “This could happen to anyone,” he said. “People need to be aware of these scams.”
