Featured Health Business Daily Story, April 21, 2016

Short-Term Policies Are Starting to Stir Up Waves in Risk Pool

Reprinted from INSIDE HEALTH INSURANCE EXCHANGES, a hard-hitting newsletter with news and strategic insights on the development and operation of public and private exchanges. Sign up for a $62 two-month trial subscription today.

By Steve Davis, Managing Editor
April 2016Volume 6Issue 4

In the halls and sessions at the World Health Care Congress in Washington, D.C., there was some hand-wringing over an April 10 Wall Street Journal article that indicated sales of short-term health insurance policies are surging — a trend HEX reported last September (HEX 9/15, p. 4). The cost of coverage sold through public insurance exchanges — combined with a fixed open-enrollment period — prompted a spike in the sale of short-term policies either to fill coverage gaps or as a lower-cost alternative to major medical insurance.

The barebones policies don’t include essential health benefits mandated by the Affordable Care Act (ACA) and won’t satisfy the individual mandate. But premiums for such plans, even combined with the tax penalty for not having insurance, might be less costly than non-subsidized ACA-qualified insurance. Short-term insurance was developed more than 20 years ago and was aimed largely at people who lost or switched jobs and couldn’t afford health care continuation coverage under COBRA.

Health plan executives worry that the low-cost policies could skim healthy people from the risk pool, leaving ACA-compliant plans with higher-cost members. Individuals between the ages of 18 and 34 made up 55% of all short-term insurance applicants at eHealth in 2014.

“I do see them as a serious threat to the stability of the market and am surprised that the big insurers are not more concerned about them,” says Tim Jost, a Washington and Lee University law professor who serves as a consumer advocate at the National Association of Insurance Commissioners.

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He acknowledges that as long as buying coverage through a public exchange is limited to open-enrollment periods, it is probably necessary to have a product for people who aren’t eligible for special enrollment periods. But if young, healthy people intentionally choose short-term products over ACA-compliant coverage, there will be adverse selection in the ACA-compliant market, he warns.

The plans are medically underwritten, and like transitional plans, absorb much of the good risk, according to Martin Hickey, M.D., CEO of New Mexico Health Connections, a Consumer Operated and Oriented Plan (CO-OP). At an April 11 session at the World Health Care Congress in Washington, D.C., he said that with the reinsurance program ending this year, transitional plans “will be even more problematic.” HHS has indicated they have no jurisdiction over the products, he added.

Jost says he is concerned that people who purchase short-term policies might not understand they still have to pay a penalty for being uninsured. They also might not understand that pre-existing conditions are excluded from the coverage. And there might be other important exclusions such as sports-related injuries. “The NAIC is looking at excepted benefit coverage and needs to look at these as well,” he says.

On March 28, Arkansas Insurance Commissioner Allen Kerr issued a consumer alert warning consumers not to “fall prey to high-pressure telemarketers selling short-term health insurance products that are not compliant with the Affordable Care Act, despite their promises.”

Short-term insurance typically is available for periods of between one month and one year.

Last fall, AgileHealthInsurance, an online insurance brokerage firm that sells short-term plans, said it was writing about 1,300 policies a month. While the plans usually don’t cover services such as mental health or maternity — and might not be available to people with pre-existing conditions — they can be as much as 70% less expensive than a non-subsidized bronze-level qualified health plan (QHP).

Some short-term plans might also include broader provider networks than some QHPs, which tend to rely on narrow networks to hold down premiums. UnitedHealth Group’s Golden Rule subsidiary is one of the biggest sellers of short-term policies, according to brokerages.

© 2016 by Atlantic Information Services, Inc. All Rights Reserved.


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