This week, the Georgetown University Health Policy Institute’s Center on Health Insurance Reforms highlighted an important new study about short-term insurance plans. This study, prepared by the Kleimann Communication Group and commissioned by the consumer representatives to the National Association of Insurance Commissioners (NAIC), revealed that consumers do not understand the limitations of such plans and are not currently being effectively educated by the disclosures they are receiving.
Short-term insurance plans, also called short-term limited duration insurance or STLDI, are health insurance plans that are exempted from many of the consumer protection and coverage requirements of the Affordable Care Act (ACA). Initially intended to function as temporary, stop-gap coverage, the Trump Administration recently expanded the availability of these plans, increasing the maximum policy term to one year and making them renewable for up to three. Previously, the plans were limited to three months and were not renewable. The Medicare Rights Center remains concerned that allowing these bare-bones plans to be sold as a long-term alternative to ACA-compliant insurance could have detrimental consequences for consumers and the health care system.
The ACA requires individual health insurance plans to meet certain standards—such as coverage of pre-existing conditions and all essential benefits, and not impose annual or lifetime benefit limits. STLDI plans, on the other hand, do not have to comply with these insurance regulations. Because they can offer a less robust benefit and deny coverage for serious medical needs, these plans typically have lower premiums than more robust, ACA-compliant plans. This may look like a great value but can expose enrollees to unlimited out-of-pocket costs if they get sick or injured and discover they are not really covered.
The proliferation of these plans may also put the ACA market at risk. Many experts predict that because they can look like a good value, short-term plans might lure healthier people away from the more comprehensive coverage available through the marketplaces, leaving an older and sicker risk pool behind. For many people who rely on the ACA’s protections—particularly older adults and people with pre-existing conditions—switching to a short-term plan is not a viable option. They would have to remain in the ACA-compliant market, where costs would likely skyrocket.
In addition to re-introducing discrimination into the health care system and destabilizing the individual market, the Medicare Rights Center and others are also concerned that increasing access to these skimpy plans would lead to significant consumer confusion. The new study shows that is indeed the case, that even when shown the marketing brochure for a popular, short-term plan few consumers could understand the plan’s benefits and drawbacks. Many assumed the STLDI policies would provide the same coverage as ACA-compliant plans, including for maternity care and prescription drugs, and expected the plans to cover pre-existing conditions. For many study participants, it took “a significant period of time before they understood” the plan’s limitations, and some participants never did so. Further, the consumers did not notice the federally-required disclosures that explain the policy’s exclusions and struggled to understand the associated cost implications.
In related news, another type of lower-quality health plan touted by the Trump Administration is running into legal problems. Association Health Plans (AHPs), like STLDIs, are not required to provide the same benefits and protections as ACA-compliant plans, though the rules are somewhat different. A federal court recently found that AHPs are not allowed under current law and that Trump Administration efforts to expand the availability of AHPs were not permissible. AHPs, which allow small business and self-employed people to band together to purchase health insurance, are notorious for defrauding consumers and leaving people who need care without the coverage they thought they were buying.
The Trump Administration will likely appeal the judge’s decision, and it is not yet clear if the ruling will prevent groups from moving forward with the AHPs they have already established, which are set to start on January 1, 2020.
At Medicare Rights, we are very concerned that many people in the market for health insurance will be confused by the appealing low premiums of STLDI plans and AHPs. They may not understand the risk they are taking and, as this study shows, they may not find it easy to find or understand information about STLDIs even when they seek it out.
In addition to our general concern, we are worried any time large numbers of future Medicare enrollees lose high-quality health coverage. As people become eligible for Medicare, their costs are related to how much health care access they had before eligibility. It is in the interest of the Medicare program that everyone who becomes eligible already have good health care coverage.