5 Things a Short-Term Medical Issuer Executive Sees Out There Now

Jan Dubauskas cares deeply about the future of what midsize health insurers can actually sell, through agents and other distribution channels, to ordinary U.S. consumers.

Dubauskas is the general counsel and chief regulatory affairs officer at IHC Carrier Solutions, part of the Independence Holding Company Group.

Insurers in the IHC Group have been writing supplemental health insurance products, and stop-loss plans for self-insured employee benefit plans, for years. It sold the stop-loss division to Swiss Re in 2016. An IHC unit still writes short-term medical insurance, hospital indemnity insurance, dental insurance and pet insurance. Another unit distributes Swiss Re stop-loss insurance.

Dubauskas is a central enough player that the National Council of Insurance Legislators recently brought her in, to the NCOIL summer meeting in Salt Lake City, to brief state lawmakers on the status of the health insurance and short-term medical insurance markets.

A copy of the NCOIL presentation slidedeck is available here.

Here’s a look at five things Dubauskas is seeing out in the market now, drawn from a recent telephone interview.

1. Parts of the Affordable Care Act framework look as if they’re here to stay.

Some ACA requirements, and some subsidy programs, may go away, but it looks as if the ACA public exchange system, the ACA premium tax credit subsidy system, and many ACA benefits requirements, such as the requirement that group plans let parents keep children on the parents’ coverage till age 26, look as if they’re baked in, Dubauskas said.

2. States like California could limit efforts by the administration of President Donald Trump to ease Obama-era restrictions on short-term medical insurance.

For decades, consumer groups, some state insurance regulators and some insurers have seen short-term medical insurance as a problem product for two main reasons: Concerns that the product draws some of the best risks out of the major medical insurance market, and concerns that consumers who buy short-term medical may end up having too little coverage to meet serious needs, or end up lacking any coverage at all at the worst possible time.

When federal regulators began enforcing key Affordable Care Act major medical benefits mandates and underwriting rules in January 2014, that made the conflict even worse.

The Obama administration responded by imposing a 90-day length limit on short-term medical insurance policy terms, to discourage consumers from using the product as a substitute for major medical coverage. Before, some states let short-term medical policies stay in effect as long as 364 days, or even 365 days.

The Trump administration appears to be preparing to lift the 90-day coverage period limit any day now.

Dubauskas said IHC is looking forward to seeing the new final regulations.

But she noted that some states are already taking stops to keep restrictions on the short-term medical market.

Selling short-term medical insurance is already difficult or impossible in states such as New York state and Vermont, and the California Senate has passed a bill that could prohibit the sale of new short-term health insurance policies in California.

3. If the commercial individual major medical market suffered from severe disruption, and state and federal regulators let short-term medical insurers step in to help people cope, issuers like IHC could probably scale up quickly.

For a company like IHC, much of the work involved with underwriting and issuing a short-term medical policy, and administering the coverage, is now fully automated, Dubauskas said.

That means expanding capacity is fairly easy, Dubauskas said.

“It think we could get ramped up surprisingly fast,” Dubauskas said.

She said the real challenge might be working with agents to explain the changes to consumers.

4. Access to more and better reinsurance could help.

One regulators and consumer group complaint about short-term medical insurance is that, because of exemptions in the ACA, the product is exempt from ACA rules. A short-term medical insurance issuer can reject applicants who already need lung transplants; cap annual benefits at $5 million, or even at $5,000; and decide whether to cover maternity care, or operations.

IHC recently began offering more access to short-term coverage for people with known pre-existing conditions.

Dubauskas said one factor determining the coverage that IHC can offer is access to reinsurance.

The company now uses reinsurance to protect itself against covered claims over $500,000.

The number of reinsurers offering to supply that kind of arrangement is relatively small, Dubauskas said.

When IHC seeks reinsurance for its short-term medical products, it typically gets bids from just two or three carriers, Dubauskas said.

5. The association health plan (AHP) market does not look all that appealing.

The U.S. Department of Labor (DOL) recently adopted final regulations that should make it easier for multi-state associations to offer health coverage.

In theory, IHC could be the kind of company that would be eager to participate in the AHP market.

But, at this point, given the benefits and underwriting rules an AHP’s insurer would face, “there’s not a great mechanism for managing the risk for the carrier,” Dubauskas said.

IHC has decided not to try to be ready to jump into the AHP market in April 2019, when the first new AHPs might start to come to life, Dubauskas said.

— Read Swiss Re Completes IHC Stop-Loss Acquisition, on ThinkAdvisor.

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