Tennessee officials have put a temporary halt on a nonprofit group's plans to provide free cellphones to new members qualifying for health insurance through the new federal health insurance exchange.
Community Health Alliance Mutual Insurance Co., a Knoxville-based health insurance cooperative in Tennessee, announced earlier this week that it would offer a free smartphone to qualifying members. Members could qualify for the phones by pledging to take certain steps to maintain their health, such as visiting a doctor within 180 days after the start of their coverage.
Word of the promotion spread quickly through news outlets and across social media this week, in which CHA's phone incentive was dubbed as "free Obamacare phones."
Then, on Thursday, the Tennessee Department of Commerce and Insurance asked CHA to halt its marketing efforts regarding the phones.
CHA's phone initiative may violate a Tennessee rebating law, said Kate Abernathy, a spokeswoman for the department. The law requires that an insurance company disclose incentive programs, such as a smartphone giveaway, in an insurance policy or certificate.
In order to move forward with this incentive, CHA will need to get further permission from the federal government, Abernathy said.
"We were made aware of the cellphone incentive program," Abernathy said. "At that point in time, we contacted the co-op. We wanted to take a step back and see if there was a violation to that section."
Some critics of federal health reform used the giveaway as another target for their protests.
"This is an absurd abuse of taxpayer money and a reminder of just how pathetic of a program 'Obamacare' is," said U.S. Rep. Diane Black, R-Tenn., in a prepared statement. "If this law were everything the president touts it to be, people would sign up for the exchanges on their own merits -- not to receive a smartphone. With a national debt approaching $17 trillion, how is this a justifiable use of taxpayer money?"
CHA was funded by a $73.3 million loan from the federal government. The organization is a new type of private nonprofit health insurance provider, called a consumer operated and oriented plan, that was established as part of the Affordable Care Act. The federal CO-OP program gave low-interest loans to eligible nonprofit groups to help set up and maintain these local operators across the country. CO-OPs are able to offer health plans through the federal Health Insurance Marketplace as well as outside the online exchange.
All of the local groups receiving loans were selected by the federal government, based on a competitive basis based on external independent review, officials said.
According to program guidelines, the federal government will closely monitor CO-OPs to ensure they are meeting program goals and will be able to repay loans.
For its part, CHA said it has been contacted by government officials and is working to provide additional information on the promotion. The nonprofit had pitched the phones as a way for patients to stay connected to their health care providers, and to help CHA stay connected to those customers as well.
"We have been asked to provide additional information, and we are in the process of doing that," said Renee Randby, a spokeswoman for CHA.