Short-term health seller fights back

Health Insurance Innovations says it will sell more indemnity products

Health Insurance Innovations faces heavy competition from major medical issuers only during the individual coverage open enrollment period. (Image: Allison Bell/LHP) Health Insurance Innovations faces heavy competition from major medical issuers only during the individual coverage open enrollment period. (Image: Allison Bell/LHP)

Health Insurance Innovations will probably generate less than $160 million in sales revenue this year, but its core product frightens the U.S. Department of Health and Human Services so much that HHS recent developed a regulation to slow sales of the product.    

The Tampa, Florida-based web broker sells a number of health insurance and supplemental health insurance products, but it's best known as a distributor of short-term health insurance policies, or policies that cover an insured's medical care for less than a year at a time.

Executives at the company say they will try to cope with HHS efforts to curb short-term health insurance sales by promoting another "gap filler" product: limited medical indemnity insurance policies that pay a fixed amount of benefits when covered events occur.

Patrick NcNamee, the company's chief executive officer, said the market for the indemnity coverage includes people with high major medical deductibles as well as people with no major medical coverage.

Because of that, "the market opportunity may be even greater than for short-term medical," McNamee said today during a conference call with securities analysts that was streamed live over the web.

Health Insurance Innovations held the call to go over third-quarter results. 

Related: Feds cap short-term health insurance duration at 3 months

The company reported $5.1 million in net income for the quarter on $46 million in revenue, up from $1.5 million in net income on $26 million in revenue for the third quarter of 2015.

Sales of short-term health products have been especially strong because "people can't afford health insurance, and they need it and want it," McNamee said.

HHS acts

Traditionally, the federal government has classified short-term health insurance, or short-term medical insurance, as an "excepted benefit" that falls outside the scope of the Health Insurance Portability and Accountability Act, the Affordable Care Act and other federal laws that set standards for major medical coverage.

Because of that, issuers can use medical underwriting to screen applicants, charge older insureds much more than they charge younger insureds, and set tight limits on both annual and lifetime benefits. Unlike a major medical plan, which must cover maternity care, must provide unlimited coverage for what the government classifies as essential health benefits, and must take applicants with heart disease or cancer who apply during an annual open enrollment period, a short-term health insurance issuer can hold premiums down by rejecting sick applicants, excluding coverage for any services it chooses not to cover, and setting low annual benefits limits.

Regulators have argued that short-term health coverage issuers deprive coverage purchasers of important ACA consumer protection provisions, may mislead purchasers about the nature of the coverage, and may hurt issuers of individual major medical coverage by drawing younger, healthier consumers out of the ACA-compliant individual major medical coverage risk pool.

To address those concerns, HHS announced Friday that it will limit a short-term health insurance issuer to providing just three months of coverage at a time, to keep consumers from using short-term health insurance policies that last for, for example, 364 days as a substitute for major medical coverage.

McNamee said Health Insurance Innovations is disappointed about that rule change and believes it will leave consumers with fewer affordable coverage options.

Related:

3 flares from the short-term health firefight

Federal regulators may try to kill critical illness insurance

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