Health Insurance Innovations (HII) had no trouble selling short-term medical insurance during the first quarter, while the individual major medical open enrollment period was still under way.
Individual major medical coverage issuers have to meet Patient Protection and Affordable Care (PPACA) benefits and benefit design standards. Many people who buy individual health plans through the PPACA public exchange system can qualify for PPACA premium tax credit subsidies.
Consumers cannot use short-term medical insurance to avoid paying the PPACA individual coverage mandate penalty. Short-term medical coverage buyers have to get through a underwriting process, and they usually face limits on coverage of pre-existing conditions. A short-term medical policy may not cover mental health care, or care for a normal pregnancy, and it may put a tight cap on total benefits payments.
But HII (Nasdaq:HIIQ) says it took 95,400 applications for short-term medical coverage in the first quarter, up from 30,700 applications in the first quarter of 2015.
The total number of short-term medical policies the company had in force increased to 115,300 at the end of the quarter, up from 45,800 a year earlier.
HII executives talked about the numbers today during a conference call they held to discuss first-quarter earnings with securities analysts.
Pat McNamee, HII’s president, told analysts the company is still trying to understand whether its products will sell better during the major medical open enrollment period, or whether the products will sell better at other times of the year. Outside the open enrollment period, which now runs from Nov. 1 through Jan. 31, consumers have to show they qualify for a special enrollment period (SEP) to buy major medical coverage.
“We’re not sure,” McNamee said during the conference call, which was streamed live on the Internet. “We’ve done our best to forecast sales.”
HII designs and distributes insurance products written by insurance companies. It makes some sales through its own website, Agile, and it makes other sales through outside agents and call centers.
HII is reporting $905,000 in net income for the quarter on $42 million in revenue, up from $53,000 in net income on $23 million in revenue for the year-earlier quarter.
The amount of commission payments HII made to other distributors increased to $26 million, from $11 million.
The number of applications taken for dental insurance, vision insurance, telemedicine services packages and other supplemental products increased to 96,800, from 26,400.
McNamee told analysts that, clearly, the rollercoaster-like health insurance market created by PPACA rules has been “extremely dynamic,” and extremely hard to predict.
In theory, short-term medical insurance could do poorly during the annual open enrollment period. That’s when consumers can buy PPACA-compliant individual major medical coverage on a guaranteed-issue basis. Short-term medical insurance could do even better during the nap period, from Feb. 1 through Oct. 31, when many consumers are shut out of the major medical market.
Regulators, insurers and PPACA public exchanges created the open enrollment period system to keep younger, healthier consumers from viewing PPACA restrictions on medical underwriting as a chance to wait until they get sick to pay for coverage.
A section of PPACA and U.S. Department of Health and Human Services (HHS) regulations exempt short-term medical insurance from the open enrollment period system.
Recently, many health insurers have taken a step that could help increase short-term medical insurance sales during the nap period: Because of concerns about SEP abuse, those insurers are refusing to pay sales commissions to agents who help consumers use SEPs to apply for coverage.
Agents could respond by selling more short-term medical policies, which still offer commissions during the nap period, and take fewer SEP applications.
But the government and public exchange programs market the idea of buying health insurance heavily during the open enrollment period. McNamee said short-term medical sales could level off during the nap period, rather than benefiting from a reduced level of competition from major medical plans.
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