BY SHELBY LIVINGSTON | APRIL
19, 2018
The Trump
administration's proposal to allow insurers to sell short-term medical plans
that last up to 12 months, coupled with the repeal of the Affordable Care Act's
individual mandate penalty in 2019, is bound to drive up enrollment in the
short-term plan market next year. Some insurance companies are gearing up to
capitalize on what they hope will be a flood of new customers by adding new,
attractive benefits to their short-term products.
At the same time, a
major online brokerage is shifting gears to promote "ACA
alternatives" rather than putting comprehensive major medical plans front
and center for health plan shoppers.
Both actions could draw more of the uninsured—and potentially some
people now enrolled in the ACA exchange plans—into coverage that the sellers
see as vital for consumers in a pinch, but that critics fear could leave the
larger individual insurance market worse off. Short-term plan
insurers will undoubtedly come out ahead with more cash in their coffers.
The Trump administration's February proposal would allow people to buy short-term, limited-duration medical plans that last up to 12 months, reversing an Obama-era rule that limited those policies to less than three months. The plans offer skimpier, cheaper coverage than the health plans found on the ACA exchanges because they do not have to comply with rules that prohibit plans from denying coverage for people with pre-existing conditions or charging more based on how healthy a person is. The plans also don't cover the ACA's 10 essential health benefits.
People who enroll in short-term plans have had to pay fines because the ACA doesn't consider the plans to satisfy its coverage requirement. But Congress has zeroed out the individual mandate penalty starting in 2019. Many experts expect short-term plan enrollment to grow after the Trump administration proposed extending their duration, potentially causing higher premiums for people who remain in the ACA marketplace.
"We believe (the proposal) will very materially increase the marketplace for short-term insurance. That will become an avalanche in 2019 when the individual mandate is repealed," said Scott Flanders, CEO of private health insurance exchange eHealth, which offers short-term medical plans.
The left-leaning Urban Institute projects that 4.2 million people will enroll in expanded short-term plans in 2019. While HHS has not given a projection, the agency said it expects about 100,000 to 200,000 people to switch from the ACA individual market to short-term plans. The average premium for a short-term plan was $110 per month for an individual and $267 for families in 2017, according to eHealth. The average premium for an unsubsidized person who bought an exchange plan on HealthCare.gov in 2017 was $476.
"We can be sure that brokers will be pushing these short-term plans hard," said Larry Levitt, senior vice president with the Kaiser Family Foundation. "And when a healthy person sees how much they can save on the premium by switching to a short-term plan, it's going to be very appealing."
That's good news for the handful of companies that dominate what is now a very small, but lucrative short-term plan market. Short-term plans don't have to comply with an ACA rule requiring individual market insurers to spend at least 80% of premiums on medical care, so those insurers are able pocket a larger share of the premiums they collect and pay out less on claims than ACA individual plans do, said Deep Banerjee, an analyst with S&P Global.
Across all insurers, short-term plans have an average loss ratio,
or the amount per premium spent on medical claims, of less than 70%, with some
plans reporting a loss ratio as low as 50%, he said. In contrast, individual
market insurers report an aggregate loss ratio of about 84% this year.
Still, the market has a fraction of the premium revenue that flows into the ACA individual market. The latest data available from the National Association of Insurance Commissioners shows that short-term medical plans covered about 160,640 people in 2016, up from 148,100 in 2015, though some experts believe the actual tally is likely higher. The plans brought in $145.6 million in premiums in 2016. Comprehensive major medical plans, meanwhile, covered 13.6 million people that year and collected $63.2 billion in premiums, the majority of which was used to pay medical claims.
UnitedHealth Group, IHC Group and property/casualty insurer National General Insurance are some of the dominant short-term plan insurers, but they haven't always been. Others include Everest Re and Standard Life and Accident Insurance Co. Many regional Blue Cross and Blue Shield insurers also offer short-term plans.
Some insurers are
introducing short-term plans with expanded coverage limits or extra benefits to
attract more of those potential enrollees. The Stamford, Conn.-based IHC Group,
for instance is launching a product in 22 states that would allow consumers to
purchase up to $25,000 of extra coverage for certain pre-existing conditions,
like asthma or physical therapy for a flare up of an old injury that otherwise
wouldn't be covered under a traditional short-term plan.
"We noticed that there was a lot of concern about pre-existing conditions with short-term medical, so we thought: Is there a way that will make people have more peace of mind about buying a short-term medical policy?" said Jan Dubauskas, general counsel for IHC Carrier Solutions, part of the IHC Group. "We think it's going to be more attractive to that 45 and up cohort, who probably have a few little conditions here and there."
Adding that extra coverage would increase an enrollees' monthly premium by about 12%, Dubauskas said. IHC Group's short-term plan members, whose average age is in the mid-40s, pay monthly premiums of about $200 to $210.
While the $25,000 worth of coverage for pre-existing conditions may make short-term plans more palatable for some consumers, some experts are unconvinced. "It's still providing less financial protection than what you would have under an ACA policy," said JoAnn Volk, a senior research fellow at the Center on Health Insurance Reforms at Georgetown University.
Other industry executives spoke of multiple prominent insurers in the space adding optional benefits, such as a prescription drug benefit, to their short-term plan policies to capture more membership, but those insurers did not respond to multiple requests for comment.
Still, "not all carriers are clamoring to do that," said Shaun Greene, senior vice president of online insurance exchange Agile Health Insurance, a unit of Health Insurance Innovations. "Most will just extend the term to six or 12 months." He added that the more benefits and longer the term of the policy, the more a consumer is going to pay.
In another move that could boost the number of people in short-term plans, eHealth is switching its focus from prioritizing ACA-compliant coverage to promoting short-term medical plans, its CEO Flanders said. The private exchange has lost market share over the last few years because it "stubbornly prioritized" selling ACA plans, even as ACA exchange plan premiums skyrocketed and priced many consumers out of the individual market, he said. The company posted a net loss of $4.9 million in 2017, and a net loss of $25.4 million in 2016.
"What we realized is if we are going to continue to arrest the declining market share, we are going to have to focus on ACA alternatives," Flanders said. That could entail placing those plans more prominently on eHealth's website, he said.
He also noted that innovation in the short-term plan space has been slow because most companies believed Congress would pass a legislative solution to stabilize and expand the individual market, but it didn't happen.
Major insurers UnitedHealth and Aetna have said they are ready to capitalize on the short-term plan proposal, expected to be finalized in the fall. Comments are due on the proposed rule on April 23. Mark Nave, senior vice president of government markets at Pittsburgh-based insurer Highmark Health, said the company once sold short-term plans and would consider "dusting off the old products" again.
Not all insurers are so keen to jump into the temporary insurance market, but will do so to avoid losing healthy plan members to competitors, Banerjee said.
Others still will keep away. Blue Cross and Blue Shield insurer Health Care Service Corp. was the No. 2 health insurer in the short-term medical market by premium revenue in 2015. It covered nearly 25,000 members and collected $40 million in premiums that year, but quit selling the plans by 2016. It has no plans to return to the products.
"The expansion of these short-term polices will benefit those who are healthy at the expense of those who have a condition," said Kurt Kossen, president of retail markets at Health Care Service Corp. "The policies don't address this issue of cost—healthy people get to pay less, but those with a health condition will pay more. I'm concerned about that from a long-term perspective."
Short-term plans have also been a magnet for numerous patient lawsuits because of unpaid medical bills. Property/casualty insurance company Tokio Marine was the leading short-term medical insurer in 2016, but stopped selling the plans after 42 states launched an investigation into its marketing practices.
"We noticed that there was a lot of concern about pre-existing conditions with short-term medical, so we thought: Is there a way that will make people have more peace of mind about buying a short-term medical policy?" said Jan Dubauskas, general counsel for IHC Carrier Solutions, part of the IHC Group. "We think it's going to be more attractive to that 45 and up cohort, who probably have a few little conditions here and there."
Adding that extra coverage would increase an enrollees' monthly premium by about 12%, Dubauskas said. IHC Group's short-term plan members, whose average age is in the mid-40s, pay monthly premiums of about $200 to $210.
While the $25,000 worth of coverage for pre-existing conditions may make short-term plans more palatable for some consumers, some experts are unconvinced. "It's still providing less financial protection than what you would have under an ACA policy," said JoAnn Volk, a senior research fellow at the Center on Health Insurance Reforms at Georgetown University.
Other industry executives spoke of multiple prominent insurers in the space adding optional benefits, such as a prescription drug benefit, to their short-term plan policies to capture more membership, but those insurers did not respond to multiple requests for comment.
Still, "not all carriers are clamoring to do that," said Shaun Greene, senior vice president of online insurance exchange Agile Health Insurance, a unit of Health Insurance Innovations. "Most will just extend the term to six or 12 months." He added that the more benefits and longer the term of the policy, the more a consumer is going to pay.
In another move that could boost the number of people in short-term plans, eHealth is switching its focus from prioritizing ACA-compliant coverage to promoting short-term medical plans, its CEO Flanders said. The private exchange has lost market share over the last few years because it "stubbornly prioritized" selling ACA plans, even as ACA exchange plan premiums skyrocketed and priced many consumers out of the individual market, he said. The company posted a net loss of $4.9 million in 2017, and a net loss of $25.4 million in 2016.
"What we realized is if we are going to continue to arrest the declining market share, we are going to have to focus on ACA alternatives," Flanders said. That could entail placing those plans more prominently on eHealth's website, he said.
He also noted that innovation in the short-term plan space has been slow because most companies believed Congress would pass a legislative solution to stabilize and expand the individual market, but it didn't happen.
Major insurers UnitedHealth and Aetna have said they are ready to capitalize on the short-term plan proposal, expected to be finalized in the fall. Comments are due on the proposed rule on April 23. Mark Nave, senior vice president of government markets at Pittsburgh-based insurer Highmark Health, said the company once sold short-term plans and would consider "dusting off the old products" again.
Not all insurers are so keen to jump into the temporary insurance market, but will do so to avoid losing healthy plan members to competitors, Banerjee said.
Others still will keep away. Blue Cross and Blue Shield insurer Health Care Service Corp. was the No. 2 health insurer in the short-term medical market by premium revenue in 2015. It covered nearly 25,000 members and collected $40 million in premiums that year, but quit selling the plans by 2016. It has no plans to return to the products.
"The expansion of these short-term polices will benefit those who are healthy at the expense of those who have a condition," said Kurt Kossen, president of retail markets at Health Care Service Corp. "The policies don't address this issue of cost—healthy people get to pay less, but those with a health condition will pay more. I'm concerned about that from a long-term perspective."
Short-term plans have also been a magnet for numerous patient lawsuits because of unpaid medical bills. Property/casualty insurance company Tokio Marine was the leading short-term medical insurer in 2016, but stopped selling the plans after 42 states launched an investigation into its marketing practices.
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