In a consumer-friendly move, the Trump administration, through a proposed rule issued by the Department of Health and Human Services (HHS), U.S. Department of Labor (DOL) and the Internal Revenue Service (IRS) —the agencies — is restoring short-term medical (STM) to its position as an affordable alternative to the spiraling costs of plans that comply fully with Affordable Care Act (ACA) coverage standards.
On Feb. 20, the agencies released a proposed rule that would return short-term medical to its prior duration of up to 12 months. In addition, the agencies have requested comments as to whether short-term medical could be revised to permit optional renewability at the end of the initial period.
On March 8, the Centers for Medicare & Medicaid Services (CMS) sent a letter to the governor of Idaho resoundingly endorsing innovation in the marketplace and using short-term medical as the vehicle to do it.
Since key ACA major medical insurance requirements were implemented in 2014, we have watched premiums rise, networks narrow and insurance companies exit the market. According to the proposed rule, in 2018, 52% of all counties have access to only one carrier on their state exchange and premiums will increase another 10% in 2019. The Congressional Budget Office estimates that 3 million people will drop their individual market coverage in 2019 and only 100,000 to 200,000 of those will purchase short-term medical, leaving many uninsured.
The proposed rule states that those who are likely to buy short-term medical “would benefit from increased insurance options at lower premiums, as the average monthly premium in the fourth quarter of 2016 for a short-term, limited-duration policy was approximately $124 compared to $393 for an unsubsidized ACA-compliant plan.” The proposed rule goes on to comment that a benefit of short-term medical is “increased access to affordable health insurance for consumers unable or unwilling to purchase ACA –compliant plans, potentially resulting in improved health outcomes for them.”
Short-term medical policies have been available for decades to address individuals’ need for temporary health insurance.
Prior to the ACA allowing dependents to be covered under their parents’ group medical plan, one of the most common purchasers of short-term medical plans were recent college graduates who were no longer covered by their parents’ plan, but were not yet covered under another group plan.
This could be because they were not yet employed or because their new employer had a waiting period before coverage would begin. In fact, the desirability of short-term medical was acknowledged by Congress because it specifically exempted STM from the requirements to which all major medical plans had to adhere.
As the proposed rule states, another use of short-term medical is “increased choice at lower cost and increased protection (for consumers who are currently uninsured) from catastrophic health care expenses.”
What should an insured expect to have covered under an STM plan?
Short-term medical provides benefits for physician services, emergency rooms, inpatient and outpatient surgery, hospital room, intensive care, ambulance services, organ transplants, laboratory diagnostics, x-rays, and more.
While STM doesn’t necessarily provide all 10 of the essential health benefits (EHBs) that an ACA-compliant major medical policy must offer, the short-term medical plans sold on my own organization’s site, http://www.healthedeals.com, cover at least part of seven of the ACA EHBs.
In addition, STM policies can provide up to an annual maximum of $2 million in medical services coverage, and typically employ networks that are less restrictive than the networks used in connection with ACA-compliant major medical plans.
Although the currently available short-term medical plans do have pre-existing condition limitations, apply simplified underwriting, and lack coverage for all ACA EHBs, an STM plan can be a very acceptable and affordable alternative to an individual major medical plan for qualified individuals.
Although STM policies do not cover every situation covered by an ACA-compliant plan, they are much more affordable.
Let’s take the example of a current ACA-compliant plan in Iowa, where premium rates are $470 per month for a woman in her thirties who has a $6,650 deductible that requires her to pay up to $6,650 in medical bills before the insurance company begins paying toward the cost.
The same woman could have bought a short-term medical plan for $166 per month with a $2,500 deductible from http://www.healthedeals.com. If she incurred a claim, she could have a potential savings of $6,148, along with a guaranteed annual savings of over $3,648 in reduced premiums.
This example demonstrates that in many cases a more affordably priced plan that covers the benefits consumers really need is a better value than an ACA-compliant major medical plan after all.
That then brings us to the question of the time limit on short-term medical.
Can short-term medical be a solution to problems with ACA-compliant individual major medical coverage when there are limits on how long an STM policy can be in place?
The short answer is yes; how we get there would be a little different than how short-term medical is sold today.
Today, because of a regulatory change adopted just a year ago, short-term medical is sold for specific durations of 90 days or less.
Once the proposed rule is effective and short-term medical can be sold for durations of up to 12 months, insureds will have the opportunity at the point of sale to determine the duration, for example 90 days, 6 months or 364 days.
The innovation under the proposed rule would permit an insured the option to purchase a new short-term medical plan at the end of the insured’s initial plan. Presumably, this would not technically be a renewal, because that would appear to be a violation of the ACA rule that an annual plan could not be underwritten.
The option to have successive short-term medical plans is new. Traditionally under STM plans, to qualify for a new plan the insured must successfully pass underwriting and restart the preexisting conditions period. Under the proposed option, it appears the Agencies are requesting that the insurer waive pre-existing condition limitations and underwriting for anyone who elects to “renew.”
Finally, some commentators have criticized the pre-existing condition clauses commonly found in short-term medical policies.
That is not an insurmountable obstacle: The IHC Group, the parent of http://www.healthedeals.com, has recently announced the Connect Plus policies, the new generation of STM policies that will offer an option that will cover certain pre-existing conditions up to $25,000 for a slightly higher premium.
For example, if a person were to purchase an STM policy after knee surgery but prior to receiving post-surgical physical therapy, the therapy could now be covered up to $25,000. This product addresses the criticism that STM policies provide no coverage for pre-existing conditions.
Unfortunately, ACA-compliant individual major medical plans are unaffordable for consumers who do not qualify for substantial government subsidies.
ACA-compliant individual major medical policies are loaded with benefits that many people will never use, which makes the out of pocket costs of premiums and deductibles for policyholders without large government subsidies unaffordable.
To reduce these costs somewhat, many ACA plans have a very narrow network of providers.
If your provider is not in network, you might not have any coverage at all. Networks under many short-term medical plans are much broader, so for someone looking to have fairly comprehensive coverage with a broader network of providers, lower premiums and reduced co-pays, the Trump administration’s endorsement of short-term medical is very pro-consumer and an important improvement to the health insurance marketplace.
— Read Average Short-Term Health Premium Creeps Lower on ThinkAdvisor.
Jan Dubauskas, AIRC, is general counsel at the specialty health division at IHC, and for the IHC’s http://www.healthedeals.com website.