SHELBY LIVINGSTON August 06, 2019 03:08 PM
For every dollar in premiums that
UnitedHealthcare collected from people enrolled in short-term health plans last
year, it spent less than 40 cents on patients' medical claims.
Short-term plans sold by Cambia Health Solutions,
which operates Blue Cross and Blue Shield plans in four states, spent even less
on medical care, paying out just 9 cents for every dollar in premiums.
These low "loss ratios"—which show the
percentage of premiums spent on medical claims and were published last week in
the National Association of Insurance Commissioners' 2018 Accident and Health
Policy Report—are a stark reminder that short-term plans benefit insurance
companies more than the patients who purchase them. The data bring into
question what kind of value people receive from enrolling in a short-term
health plan, insurance experts said. The Trump administration expanded access to such plans last year.
"Compared to comprehensive plans that have
to comply with the ACA's rules, short-term plans' coverage limitations often
result in carriers paying out far fewer claims, or paying pennies on the
dollar," said Rachel Schwab, a research associate at Georgetown
University's Center on Health Insurance Reforms.
The average loss ratio of the five health
insurers that bring in the most premiums from short-term insurance policies was
39.2% in 2018. That means that 39 cents of every $1 collected in premiums was
spent on medical care, while the rest was spent on administrative expenses or
kept as profit.
In contrast, the average loss ratio among
comprehensive major medical plans purchased by individuals in 2018 was about
73%, according to the NAIC report.
Short-term health plans' loss ratios are lower
because they don't cover nearly as many benefits. Unlike Affordable Care
Act-compliant plans, short-term plans can deny coverage to people with
pre-existing health conditions and charge more based on health status. They are
not required to and often don't cover the 10 essential health benefits,
including maternity care and prescription drugs. Their limited coverage also
makes them much cheaper than ACA plans.
While ACA-compliant plans must meet a minimum
medical-loss ratio of at least 80% or else pay rebates to enrollees, short-term
plans are not subject to a minimum MLR requirement.
"There's no requirement that they spend
most premiums on medical care," said Cheryl Fish-Parcham, director of
access initiatives at Families USA. "They can take in lots of premiums and
pay very little for consumers' care."
The loss ratio for UnitedHealthcare, the leader
in the short-term plan market, decreased each year to 37.3% from 50.9% in 2016,
according to the NAIC annual reports. Over the same period, the company, which
sells short-term plans through its Golden Rule Insurance subsidiary, has grown
its premiums from those plans to $41.7 million from $26.5 million.
"Short-term, limited-duration insurance
helps increase choice and coverage by providing a broad portfolio of low-cost
options that meet the unique needs of individuals," UnitedHealthcare said
in response to a question about why its loss ratio is decreasing. "These
policies are not right for everyone and we work to ensure consumers have the
information they need to make the right decision based on their
circumstances."
A company spokeswoman added in an email that
loss ratios can vary significantly year to year because of the shorter plan
duration and changes in who buys the plans.
According to the NAIC's latest report, about
86,600 people enrolled in short-term plans in 2018, but that figure likely
doesn't capture the entire market since many short-term plans are being sold through out-of-state associations exempt from
regulation.
Enrollment in short-term plans is expected to
grow this year in the wake of Trump administration's August 2018 rule, upheld by a federal judge last month, that allowed insurers
to extend the duration of short-term policies from a maximum of three months to
up to a year. That rule, coupled with the Trump administration's move to
zero-out the individual mandate penalty, made short-term plans a more
attractive option for healthy individuals.
The CMS expected about 600,000 additional people
to enroll in short-term plans in 2019, with that figure reaching 1.6 million
people by 2021 or 2022. At the time, the Trump administration said expanding
access to short-term plans would allow more coverage options for people who had
been "priced out" of ACA exchange coverage. But critics sounded the
alarm that individuals may enroll in the cheaper, skimpier plans without
understanding the risks.
"If the MLRs were higher, that would
suggest people are still getting value (from the short-term plans). But when
loss ratios are very low that means there's a lot of overhead built into your
premium and a relatively small amount of your premium is actually going to be
paid out in claims. It does raise the question of what kind of value people are
getting from these plans," said Cynthia Cox, a vice president at the
Kaiser Family Foundation.
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