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Bad insurance agent

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The Georgetown University Health Policy Institute puts out great health policy data and analyses.

Sabrina Corlette and JoAnn Volk, institute analysts, recently posted an interesting blog entry, on the institute’s Center on Health Insurance Reforms website, about Volk getting a call from an insurance agent who misrepresented short-term health insurance. I think the implications of the story are relevant to sellers of Medicare products and long-term care insurance as well as major medical coverage.

Short-term health insurance is not the kind of “minimum essential coverage,” or major medical coverage, that frees an individual from having to pay the Affordable Care Act penalty on the uninsured, and underinsured.

The agent reportedly told Volk not to worry about the ACA individual mandate penalty, assuring her, “There are ways not to be fined.”

Related: The DOL fiduciary rule, duties to consumers, and the Best Interest Contract Exemption

Of course, the agent was wrong to talk that way. The agent might be contributing to individual major medical application fraud.

Corlette and Volk then write about how much better ACA-compliant coverage is than short-term health insurance is. This is where I stopped nodding and started muttering.

One problem with short-term health insurance, from the perspective of someone who likes the idea of everyone having major medical coverage, is that short-term health insurance is medically underwritten. Sick people can’t get it, or can’t use to cover conditions they already have.

Another concern is that, because short-term health insurance issuers fall outside the ACA benefits rules, the issuers can offer skimpier benefits. The issuers can offer coverage that’s cheaper than major medical coverage by using a combination of medical underwriting and skimpier benefits to hold claims down. If the short-term health issuers attract too many healthy people with low premiums, that can hurt major medical issuers and drive up the cost of major medical coverage.

Still another concern is that, as hard as it is to know how well a major medical plan issuer is administering claims, it’s even harder to know how well a short-term health insurance issuer is paying claims.

Those concerns aside, the idea that ACA-compliant coverage is necessarily better for a healthy consumer who can’t qualify for rich ACA individual major medical premium subsidies than short-term health insurance from an honest, efficient issuer is absurd.

At this point, a short-term health insurance policy is more likely to offer access to a broad network of providers. Because the policy does not have to comply with the ACA benefits mandates, it can offer richer benefits for the kinds of care that ordinary consumers need on a regular basis, such as care for sore throats and broken legs.

I think this is a cautionary tale about what can happen when policymakers substitute their judgment for what consumers should have for what consumers want.

The policymakers hemmed in issuers of long-term care insurance in with rules that forced the issuers to stick with unsustainable rates and product design rules, to the point the rules killed off most of the products. And those same policymakers are now looking with hostile eyes at the short-term care insurance policies that issuers are still willing to write.

The policymakers have also pushed to require Medicare supplement insurance issuers to increase insureds’ out-of-pocket costs, to give the insureds more “skin in the game,” even if the insureds might prefer to buy policies that hold down claim costs using other types of cost-control strategies.

If policymakers think the good rules like those do outweigh the bad: Well, fine. It’s up to voters and their elected representatives to push back when the policymakers are wrong/

But, if telling individual consumers what insurance products are best for them today is bad, because that conflicts with what’s best for America: Maybe more insurance agents should be bad. Maybe consumers deserve to hear from agents who are bad enough to put the interests of their customers first. 


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