Don’t be misled by low premiums when covering short-term health plans
By Laura Newman
Since August, President Trump and the federal Department of Health and Human Services have been promoting short-term health insurance plans as a more affordable choice than health plans that comply with the requirements of the Affordable Care Act. But reporters need to dig deeper to see how these plans affect consumers and the health insurance market in general because first looks can be deceiving.
On Aug. 1, the Internal Revenue Service, Department of Labor and the Centers for Medicare & Medicaid Services issued a final rule to amend the definition of short-term, limited-duration health insurance plans. Previously these plans were excluded from the definition of individual health insurance coverage. The goal of the final rule was to extend the maximum duration of these short-term insurance plans to provide what the administration calls “more affordable consumer choices for health coverage.” The rule allows insurers to sell these plans with an initial coverage period of as long as 12 months and with the option to renew twice. Under previous law, these plans were limited to three months or less without the ability to renew.
Proponents of these plans say that premiums for short-term plans are lower than they are for ACA-compliant health plans. But using premiums as a single metric for affordability is misguided because many of these plans exclude important areas of coverage rendering the coverage relatively worthless. In October 2018, a report from the Kaiser Family Foundation estimated that premiums for short-term health plans could be 54 percent lower than those for ACA-compliant plans because they often exclude people with pre-existing conditions and provide far less comprehensive benefits.
Furthermore, by restricting access to short-term plans only to healthy people, health insurers will have fewer claims payments to process and will drive the sicker patients who use more health care services into ACA-compliant plans, bifurcating the health insurance market and driving up the cost of ACA plans. Unlike ACA plans, there are no essential benefits or coverage requirements for short-term plans. Often, health insurers will exclude from short-term plans coverage for prescription drugs, mental health and addiction treatment and maternity other types of care. Consumer protections are wanting and dollar caps on coverage are low. If a member with a short-term plan becomes sick during the coverage period, the plan can refuse to renew your plan.
Limits on what an insurer would spend on covering an insured individuals would certainly become a concern if and when a healthy individuals becomes sick or develops a chronic condition. Health care journalists can expect to find individuals who had short-term health plans who got sick, but then were surprised to learn that they had astronomical bills for uncovered categories of care. In worst-case scenarios, members with short-term plans may acquire substantial debt and need to file for bankruptcy. See, for example, the article Nancy Metcalf wrote for Consumers Reports, “Is 'Short-Term' Health Insurance a Good Deal?”
Another issue for health care journalists to cover stems from the fact that insurance regulators may not do as much oversight as they did for ACA-compliant plans, a factor that could lead to misleading marketing practices. In November, Robert Pear reported for The New York Times that federal authorities shut down a group of Florida companies, saying the companies had used deceptive sales tactics to promote skimpy health insurance plans that skirted the requirements of the ACA. The result was thousands of people nationwide were left with unpaid medical bills. Pear added that a federal judge froze the companies’ assets, saying there was reason to believe the companies sold shoddy coverage by falsely claiming the plans offered comprehensive coverage or were qualified health plans under the ACA.
Metcalf wrote about similar problems in Montana and Pennsylvania.
When it issued the final rule in August, CMS agreed with patient advocacy groups to adopt consumer protections, forcing health insurers offering these plans to disclose to applicants how the plans compared with ACA-compliant plans. Coverage of pre-existing conditions was a significant issue during the midterm elections in November, and reporters need to know that unlike ACA plans, these plans do not cover these conditions, nor do insurers need to cover essential benefits as do with ACA-compliant plans. In fact, once patients have a medical history of specific health problems, these plans can freely reject renewal requests.
Stop-gap plans going longer term, some states out
Journalists covering short-terms plans will find substantial controversy about their benefits and risks. Proponents are correct then they say that premiums for short-term plans are more affordable than payments needed for ACA-compliant health care coverage. Also, proponents add that short-term health plans were originally designed as a stop-gap of limited duration for individuals in between jobs or children going off their parents’ health insurance plans at age 26.
But as proponents promote these plans, critics question them. For example, these plans are not considered creditable coverage in the individual market, causing critics to worry that a parallel insurance market operating under a different set of rules will draw away low-cost, healthy people from ACA-compliant plans. If that happens, sicker individuals who need good coverage would buy ACA-compliant plans, a trend that could drive up premiums and copayments for those already enrolled in ACA plans and thus paying more than those enrolled in short-term plans.
Another factor for journalists to cover is that consumers will be able to renew these plans for as long as three years — if the insurers approve such renewals. When it issued the final rule in August, CMS acknowledged that the three-year extension could be removed and that it was aware that a lawsuit could be filed challenging the three-year extension.
Late in 2018, Massachusetts, New Jersey and New York had prohibitions against short-term health plans and California was considering such a ban. Other states have mandated that short-term plans offer consumer protections similar to those in ACA-compliant plans, such as by requiring plans not to discriminate against people based on their health status. Other ways that states are trying to rein in abuses are to make the plans adopt health benefit provisions that are similar to the essential health benefits that plans must offer in the individual market place. Colorado requires insurers to advise applicants about the absence of coverage for pre-existing conditions.
Given all of these issues, the short-term health insurance market is likely to remain in flux and thus will be fodder for many articles in the months and years to come.
For more information on short-term health insurance plans see:
CMS Fact Sheet: Short-Term, Limited-Duration Insurance Final Rule
Laura Newman is a medical reporter, writer and editor in New York. She specializes in writing about clinical medicine, new drugs, diagnostics and health policy.