PPACA World was supposed to make short-term medical insurance obsolete by eliminating holes in Americans’ major medical coverage.
The Patient Protection and Affordable Care Act (PPACA) underwriting restrictions, insurance standards, public exchange system and health insurance purchase subsidies were supposed to bring on a new age – a day when every man, woman and child could use an insurance card to get high-quality care from a high-quality provider in a high-performance network.
So much for that.
This year, Americans still have many of the old holes they always had in their coverage, and they’re discovering new ones. PPACA World now operates (when it manages to operate) side by side with a parallel health insurance universe that might be called the New Hole World.
The consumers in the New Hole World include healthy people who:
- Are not eligible for the exchange plans (such as people with visa problems)
- Tried to buy exchange coverage and have no idea whether they actually have it
- Find that PPACA-compliant coverage for people their age is absurdly expensive
- Think the provider networks available with the PPACA-compliant plans they can afford are awful
- Travel frequently and would rather not have to buy travel insurance just to see a doctor on the road, outside of an exchange plan provider network that can fit on the back of a napkin
- Paid for exchange coverage (or non-exchange coverage from an insurer that’s coordinating the non-exchange enrollment period with the exchange enrollment period) a little late and face gaps in coverage ranging from one day to about six weeks in length
PPACA includes many consumers – including losing access to individual or group major medical plans – who will enroll in exchange plans through a special enrollment period. In some states, non-exchange insurers may be trying to avoid anti-selection by coordinating their own individual coverage enrollment periods with the exchange enrollment period system. The problem is that some consumers who fail to plan carefully could end up with coverage gaps.
Suppose Jane Doe loses her job June 30. If she applies for exchange coverage from July 1 through July 15, she’ll have insurance in place Aug. 1. If she procrastinates and submits her application from July 16 through July 31, she won’t have insurance until Sept. 1. In this case, she might want short-term medical insurance to fill the gap.
Some consumers who qualify for subsidized exchange policies would rather buy something else because they hate the idea of using coverage that has anything to do with PPACA. In states with balky exchange enrollment systems and expensive non-exchange products, consumers see buying short-term medical insurance as a way to get covered without being on hold for three days. Other consumers have actually signed up for coverage through the exchange and need backup coverage because something went very, very wrong.
Ryan Kennelly of Illinois Health Agents Inc. said he has run into several consumers with good incomes who tried the public exchange website and accidentally ended up in Medicaid. “We’re still looking into why they’re in that and trying to get them out,” he reported.
Health Insurance Innovations Inc., a publicly traded company that gets much of its revenue from distributing short-term medical products for insurers, says application volume was 50 percent higher in the fourth quarter of 2013 than it was in the fourth quarter of 2012.
Andrew Bard, vice president of sales at HCC Medical Insurance Services, one of the insurers active in the short-term medical market, said business at his company has also been great. “We’ve had an extremely high spike in sales in December and January,” he said.
Dale Ehrgott of Advanced Insurance Consulting, the parent of LifeHealthDental.com, an insurance sales site, said he hopes insurers will continue to support the market for short-term medical insurance. “It’s a great product,” Ehrgott said. “It fills a perfect niche.”
In most states, a short-term medical insurance policy is a policy with a coverage term ranging from one month up to 11 months. PPACA exempts short-term medical insurance from the new PPACA health insurance underwriting, pricing and benefit design standards, and most states apply fewer rules to the products than they do to ordinary major medical coverage.
The result is that issuers can keep short-term medical premiums down the old-fashioned way: By rejecting applicants with health problems; refusing to cover preexisting conditions; declining to cover certain types of care, such as mental health care or routine maternity care; and imposing annual benefits caps.
Consumers who have short-term medical coverage and develop a chronic health problem while covered may find that they are unable to qualify to renew the coverage – or to buy any other medically underwritten coverage – after the policy term ends.
Under PPACA, commercial short-term medical insurance does not qualify as “minimum essential coverage” – the kind of major medical policy that can help individuals get out of paying the PPACA “shared responsibility” penalty. For 2014, the penalty for failing to have PPACA-compliant major medical coverage will be $95 per individual and $285 per family, or 1 percent of income, whichever is greatest. But many people, including people who can show that exchange coverage is unaffordable, can get out of paying the penalty, and the cost of the penalty is, obviously, much less than the cost of having to deal with a broken arm or a heart attack without health insurance.