More consumers are purchasing short-term limited duration insurance plans-which will likely have long-lasting effects to consumers and the insurance market as a whole.
One of the main goals of the ACA, sometimes referred to as Obamacare, was to provide affordable health insurance to every American.
The law’s passage in 2010 made it possible for nearly 54 million Americans-previously denied coverage due to pre-existing medical conditions-to purchase coverage, as well as landmark provisions to protect those who developed an expensive medical condition while insured from being unexpectedly dropped by their health plan.
By all accounts, such provisions helped a record number of Americans procure medical insurance coverage-and, by extension, reduce healthcare costs and avoid medical bankruptcies.
Yet, with the elimination of the individual mandate penalty in 2017, and other policy changes that have forced up the cost of premiums, many Americans are looking for options off the healthcare exchange.
One such option is the short-term limited duration insurance (STLDI) plan, loosely defined as bare bones medical coverage that can last up to 12 months with the potential for renewal. Managed Healthcare Executive® Editorial Advisor Margaret Murray, chief executive officer of the Association for Community Affiliated Plans (ACAP), said such plans “are not really insurance,”-and refers to them as “junk insurance.” With a new 2018 HHS rule that dramatically expands access to this type of coverage, she worries that their availability will hurt consumers.
“Insurance brokers may offer these plans to consumers and those consumers may not realize that they largely reverse ACA protections regarding pre-existing conditions and coverage limits,” she says. “These plans don’t cover what you think they will cover, the insurance companies can cancel your policy at any time, and they can deny your access to maternity care and certain drugs. It’s not really major medical insurance and it’s not always easy for your average consumer to see that.”
The Trump Administration contends, with rising insurance premiums, that such short-term plans make health insurance more affordable for the average American.
Cathryn Donaldson, a spokesperson for America’s Health Insurance Plans, a health insurance trade association, says such plans “can provide a temporary bridge for those who are going through a life transition or gap in coverage such as having a baby or changing jobs.”
Yet, Karen Pollitz, a senior fellow at the Kaiser Family Foundation, says STLDI plans embody the old adage about getting what you pay for. STLDI are not required to comply with many of the ACA’s most important protections, which means insurance companies can exclude coverage for pre-existing conditions, charge higher premiums based on health status, impose annual and/or lifetime caps, and opt out of coverage for things like maternity care or mental health treatment. They can also revoke coverage at will.
“Under the ACA, it used to be that short term and minimum essential coverage [MEC] policies had to have a prominent warning printed on the front place that said, if you buy this, you are not getting full coverage and may even owe a tax penalty,” she explains. “Those warnings are no longer there and that’s of concern.”
Furthermore, late last year, HHS put forth a final rule extending the duration of STLDI from a mere three months up to 364 days. In addition, insurers can offer renewals and extensions for up to three years. What is even more concerning, Murray says, is the current Administration is now actively promoting the use of private web broker sites to market STLDI. This can make it more difficult for consumers to understand which plans offer comprehensive medical coverage and which are the riskier STLDI plans.
“The current administration says such plans offer consumers more affordable options-and more choice,” Murray explains. “But the marketing for these plans is really disingenuous. It’s not just that they are just short-term. They don’t cover what people think they will cover. They are very profitable for insurance companies. But they can be very costly for consumers, who likely won’t realize they don’t have comprehensive coverage until they are sick or injured.”
Over the past few months, several high-profile publications like Consumer Reports and the Washington Post have printed stories about the dangers, and unexpected costs, of STLDI for consumers.
“It’s like you are in the market for a car and someone offers you a really affordable roller-skate,” says Pollitz. “But a roller-skate is not the same thing as a car. It’s not going to get you as far if you really need to travel. And it’s going to cost you more in the long run.”
Murray also cautions more widespread adoption of such plans can affect the entire insurance market, siphoning cost-conscious consumers from risk pools and driving up premium costs for everyone.
“There are always some young invincibles, who think they won’t get sick-and there are some invincibles, too-and they will be attracted by the lower premiums,” she says. “But in doing so, that will leave people who are sicker to pay higher rates by moving people out of the ACA marketplace.”
That’s one reason why ACAP, as well as six other health organizations, filed a lawsuit in the U.S. District Court for the District of Columbia on September 14, 2018 in order to roll back the new STLDI rule and stop the expansion of such plans. Murray said the HHS rule violates the ACA, “undercutting plans that comply” with the still active legislation. They argue the Trump Administration is using these new rules to try to overturn the ACA-which they have not yet been able to successfully repeal in Congress.
“We thought this was important enough that it was worth suing the federal government in order to try and stop it,” she says. “We had hoped to get a summary judgment last year because we wanted to stop the spread of STLDI plans for the 2020 open enrollment. Unfortunately, we didn’t get that. The judge ruled against us. But we are appealing it-and the hope is that we will have a decision to stop these things being sold in 2021.
The take-home message
Donaldson says it is vital the healthcare community educate consumers about the risks of STLDI plans and make sure they are better aware of what sort of comprehensive plans are available on the Healthcare.gov marketplace.
“While alternative plans such as association health plans and STLDI may present more affordable premiums, they are not a replacement for comprehensive coverage and may not cover the treatments or prescriptions an individual may need throughout the year,” she says.
“We understand that life happens and there may be all manner of reasons why you are separated from coverage,” she says. “But it is becoming harder and harder to distinguish these plans from real coverage especially now that they are now being aggressively marketed to people all over the country. And it’s vital that people understand that 90% of consumers will play less than the listed price on Healthcare.gov marketplace because they qualify for subsidies. It really does pay to take the time to look before you sign up for one of these short-term plans.”
Kayt Sukel is a science and health writer based outside Houston.