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Short-term medical: Who's the prospect?

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The Patient Protection and Affordable Care Act (PPACA) seems to be changing the core market for short-term medical insurance.

Ten years ago, the obvious prospects were young people who were fresh out of college and workers who had lost their jobs and were horrified by the cost of COBRA continuation benefits.

One of the first major PPACA provisions that took effect bit into the core short-term medical market by requiring plans that offer dependent benefits to let enrollees keep children on the plan up until age 26.

Today, the new PPACA insurance underwriting rules, subsidies and public exchange system are supposed to give all consumers, including consumers with health problems, an easy way to buy affordable health insurance on a guaranteed-issue basis.

PacificSource, an Oregon insurer, was one of several health insurers that saw the PPACA young adult dependent coverage provision as a reason to flee from the short-term medical market. “We believe the demand for short term medical products will be significantly reduced or eliminated by health care reform changes,” the company said in a bulletin addressed to agents.

Now that the PPACA insurance rules are taking effect and the PPACA exchange program has had a rocky start, PPACA may be making short-term medical even more attractive to young, healthy adults and relatively young, healthy COBRA candidates than it used to be.

In the past, Ryan Kennelly of Illinois Health Agents Inc. was selling one or two short-term medical policies per week. In the fourth quarter of 2013, as the public exchanges jolted to life, sales increased sharply. “I probably sold more short-term policies than I ever have before,” Kennelly said.

The new PPACA tax credit subsidy can slash the amount of premium a low-income consumer must pay for coverage. But in many states, for consumers with relatively high incomes, PPACA rules have led to dramatic increases in the list price of both exchange and non-exchange individual coverage.

For an older worker, Kennelly said, an exchange plan may be a better deal than a short-term medical policy. But Kennelly said he recently served a young worker who would have had to pay $300 per month for ordinary major medical coverage and ended up paying just $60 per month for a short-term medical policy.

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